BUILDING the Report 1 Report 2 Report 3 INCLUSIVE Broad-Based Cooperative Growth Strategies for Financing ECONOMY Ownership Models Ecosystems the New Economy
THE COOPERATIVE GROWTH ECOSYSTEM Inclusive Economic Development in Action A joint project of Project Equity and the Democracy at Work Institute Melissa Hoover & Hilary Abell, Lead Authors
project Building the Inclusive Economy series: Through three groundbreaking reports funded by Citi Community Development, Building the Inclusive Economy series sets out new, cutting-edge economic development models for city leaders and community development practitioners interested in embedding equity, community wealth, and sustainability into their local economic growth plan. This series, authored by The Democracy Collaborative, The Democracy at Work Institute, and Project Equity, lays out key tools and building blocks for equitable local economic growth where all residents are able to maximize opportunities, thereby expanding urban economies where all can meaningfully participate and benefit. To learn more about the series, visit www.CitiCommunityDevelopment.com.
The Cooperative Growth Ecosystem Project: This paper is the fruit of a year-long project carried out by the Democracy at Work Institute and Project Equity in 2014 and 2015. Hilary Abell and Alison Lingane of Project Equity, Melissa Hoover and Tim Palmer of the Democracy at Work Institute, and consultant Tim Lohrentz comprised the team that developed the Cooperative Growth Ecosystem framework; piloted it as an analytical and strategy tool looking at five regions around the country; hosted a national convening, in coordination with Citi Community Development, to get feedback and provide space for regions to develop actions plans; and developed this paper to share with the field. Engagement with partners in the San Francisco Bay Area, New York City, Cincinnati, Madison, and Western North Carolina played a vital role in the process. Both the Democracy at Work Institute, through its Local Initiatives Program, and Project Equity are available to support regional groups in applying the ecosystem framework in their communities.
Democracy at Work Institute and Project Equity: The Democracy at Work Institute works at the national level to expand the promise of worker ownership to communities most affected by economic and social inequality, and to ensure that future growth in the field is adequately supported and strategically directed.Project Equity, based in the San Francisco Bay Area, fosters economic resiliency in low-income communities by demonstrating and replicating strategies that increase worker ownership. Combined, the project team has many decades of on-the-ground experience supporting worker cooperatives and social ventures.
LEAD AUTHORS: Hilary Abell, Co-founder, Project Equity Melissa Hoover, Executive Director, Democracy at Work Institute
Acknowledgments: We are grateful to the regional ecosystem leaders who we interviewed and consulted throughout the project and the many colleagues who so generously reviewed drafts. Thank you also to Project Equity intern Samy Jana for her research support, to our copy editor Tom Berger, and to the Surdna Foundation for additional funding for this work.
Published January 2016. © 2016 by Democracy at Work Institute and Project Equity.
This work is licensed under the Creative Commons Noncommercial Attribution License: http://creativecommons.org/licenses/by-nc/3.0/deed.en_US Copyright 2016 © Democracy at Work Institute and Trust for Conservation Innovation, on behalf of its program, Project Equity. © Project Equity and © Trust for Conservation Innovation are used interchangeably in this publication. Layout and cover design by Kate Khatib/Owl Grammar Press. Interior graphics by Kris Drury/Tythe Design.
project MADISON
NEW YORK CITY SAN CINNCINATI FRANCISCO BAY AREA
WESTERN NORTH CAROLINA
The Cooperative Growth Ecosystem framework Executive Summary presents the recent wave A new approach to local economic development of worker cooperative has never been more urgent, as poverty development as a timely, concentrates and inequality rises in cities across the United States.1 A new approach has also high-potential strategy never been more possible. Faced with a widening for inclusive, place-based racial wealth gap, unprecedented displacement community economic of people of color from urban cores, and development. The Democracy deadlocked federal and state governments, cities at Work Institute and Project across the country are flexing their local muscle Equity developed this to solve big problems. They are innovating. They framework to engage diverse are prioritizing strong local economies. Various actors across the private, public and private sector actors are working together to maximize broad-based community public, nonprofit and financial benefit in real and sustainable ways. sectors in exploring how they can work together to catalyze worker co-op development Purpose
that creates quality jobs and The Cooperative Growth Ecosystem framework wealth-building opportunities encourages diverse stakeholders in the field of for low- and moderate- community economic development to invest in income workers. inclusive economic development by fostering
1 cooperatively owned enterprises within a broader entrepreneurial "ecosystem." It encourages organizations investing in worker cooperative development to push their conception of “cooperative business development” beyond basic supports for shared entrepreneurship to more coordinated, high-investment incubation and conversion models. It reframes quality jobs as well-paid jobs with ownership opportunities and envisions an ecosystem that can be leveraged to support viable worker- owned enterprises. We started with the following questions:
What are the key elements of an entrepreneurial develop and support those elements that are ecosystem that supports sustainable growth of most critical for scale?
cooperative enterprises and their ability to create Are there common stages of development for a quality jobs and assets for low-wage workers? Cooperative Growth Ecosystem?
How do different elements in an ecosystem In active ecosystems like the five we studied, how interact with each other to support pathways to can actors collaborate for next-stage growth? scale—whether through startups, acceleration, In communities where no worker cooperatives or conversion of conventional businesses to or co-op developers exist today, what is the best cooperative ownership? place to start? Who are the actors in an ecosystem and how can they leverage existing resources and culture to
In other words, how can all the actors in a place work together strategically to turn the demand for worker cooperatives into the supply of what is needed to create them?
Beginning to answer these questions—and using the answers to develop strategic action plans—will position those investing time, resources, and political capital in developing worker cooperatives for success. We believe that ecosystem thinking and well-informed collaboration can make the difference between creating a few worker cooperatives and building an ecosystem in which worker coops create good jobs and real wealth for large numbers of people who are today working poor, underemployed. The Cooperative Growth Ecosystem Framework
The Cooperative Growth Ecosystem refers to a systemic understanding of what helps worker cooperatives thrive and reach a scale that has impact. The ecosystem includes actors—individuals, organizations and institutions—and elements that interact to support or inhibit scaled growth of worker cooperatives. Our framework is inspired and informed by five distinct entrepreneurial ecosystem frameworks from diverse entities: the Babson Entrepreneurship Ecosystem Project, the World Economic Forum, Monitor Group, PolicyLink, and Social Enterprise Greenhouse.2 Four high-level elements were common to all: financial capital, human capital, business supports, and attitudes and culture. In addition, each had elements related to policy, markets, and education. We include all of these and add elements that we see as critical to the growth and success of worker cooperatives that provide opportunities for low- to moderate-income workers.
2 The Cooperative Growth Ecosystem has eleven elements in all, in three major categories. Essential Elements are the building blocks WHAT ARE of cooperative businesses and the engines WORKER for growth; neither impact nor scale can be COOPERATIVES achieved without them. Important Elements accelerate growth and can be key drivers for ? scale initiatives. Environmental Elements legitimize and create demand for worker Worker cooperatives are values- cooperatives, but do not directly support driven businesses that put growth or scale. worker and community benefit at the core of their purpose. The ESSENTIAL ELEMENTS: BUILDING BLOCKS members of the cooperative are ∂ Member skills and capacity the people who work in it. These ∂ Financing typically small and medium- ∂ Technical assistance sized businesses can be found in ∂ Growth-oriented co-op developers every sector and industry, from engineering and manufacturing IMPORTANT ELEMENTS: ACCELERATORS to retail to service. Workers ∂ Business supports participate in the profits, ∂ Connections to market oversight, and, to varying ∂ Policy degrees, the management of the ∂ Advocacy partnerships organization, using democratic practices. Workers own the ENVIRONMENTAL ELEMENTS: LEGITIMIZERS majority of the equity in the ∂ Values-driven businesses business and control the ∂ Attitudes and culture voting shares. ∂ Cooperative education
STAGES OF ECOSYSTEM DEVELOPMENT
Developing a Cooperative Growth Ecosystem is a long-term, iterative undertaking. There is no single way to coalesce a robust ecosystem. We know that it is the Essential Elements that build worker cooperatives, but in many communities, Environmental and Important Elements such as advocacy partnerships and community awareness may be initial catalysts for ecosystem growth. While Ecosystem Elements do not fall into place in a set sequence, the process of purposeful ecosystem development seems to progress through common stages. Drawing on change management and systems innovation theory,3 we see multiple stages of ecosystem development, which may evolve sequentially or simultaneously.
3 BEGIN : Identify the change you seek and learn from others. Identify the impact goal: Why start worker cooperatives? Is it to provide quality jobs, to retain closing businesses, to meet the immediate needs of contingent workers, to change an industry, to reduce inequality? Connect with co-op developers locally and in the field more broadly to understand the history and successes of their efforts. Knowing both their own end goals and what others have learned will help early stage actors define their unique value and role in the ecosystem.
CONVENE : Develop a “guiding coalition,” analyze the ecosystem, and create a strategic vision. Understand the ecosystem: identify gaps, strengths and opportunities, and the potential roles of the various interested early stage actors. Learn from other regions about what they have done to support effective cooperative development and how they have built their ecosystems. Identify what local actors can do now to build an ecosystem that supports a successful pilot project. Important and Environmental Elements may be the most operative at this stage, but any set of actors and elements can lead during these early stages.
CREATE : Pilot successful practices and create short-term wins. Prove the concept: using the ecosystem analysis, identify a proof of concept cooperative development project to undertake that draws on best practices in the field of worker cooperative development. Adequately resource and support this pilot project and leverage the strengths of the early stage actors to fill gaps and build capacity for scale. Expect some difficulties, even failures, and incorporate these expectations into the early stage work, from fundraising to project planning. Evaluate and learn from the pilot. Building Essential Elements will be critical to the success of the Create stage, which may actually begin alongside, or even precede, the Convene stage, as a proof-of-concept undertaking.
CONSOLIDATE : Build momentum toward a tipping point. Build on early success and lessons learned to take growth to the next stage. Reassess the changing ecosystem to identify potential catalysts for next-stage work. Bring in new actors and mobilize more resources for worker cooperative development aimed at scale. Using strong Important and Environmental Elements to create more robust Essential Elements is crucial in the Consolidate stage.
SUSTAIN : Anchor new approaches to create a “new mainstream.” This stage is where worker cooperatives, co-op developers, capital providers and advocacy partners are actively evolving the ecosystem that co-ops need to thrive and grow. With adequate systemic supports, entrepreneurs are forming worker cooperatives as a matter of course and cooperative developers are executing development projects in close partnership with capital providers. In a mature ecosystem, all elements need to be working together at a systems level, and a wide range of actors must collaborate effectively over time. It is at the Consolidate and Sustain stages that conditions for scale develop.
4 Regional Examples
We used the Cooperative Growth Ecosystem framework to do an initial “ecosystem analysis” of five places across the country. We chose to study the San Francisco Bay Area, New York City, Cincinnati, Madison, Wisconsin, and Western North Carolina, as much for the differences among them as for their individual achievements and potential. We wanted to learn from the dynamics within a city or region with a fair amount of cooperative development activity, as well as from patterns, commonalities, and variances we might be able to discern across the five places—and then apply those learnings to suggest interventions.
Our six examples—five cities and regions around the country and the fictional Any Town USA—can help illuminate how Cooperative Growth Ecosystems develop and how using an ecosystem framework can strengthen the role of worker cooperatives in community economic development. They offer insights about how to move an existing ecosystem toward maturity and how to jump-start a new ecosystem. For instance, comparing our two largest regions, the San Francisco Bay Area and New York City, reveals very different strengths and gaps that suggest distinct courses of action for developing their cooperative growth ecosystems.
The vibrant, long-standing Bay Area worker cooperative community has strong cross- pollination of skills and capacity at the enterprise level and a wealth of co-op development experience, but a notable lack of policy alliances and supports. To realize their shared community economic development goals and help reduce the region’s rapidly growing inequality, Bay Area actors will need to collaborate effectively to galvanize more resources and strategic partnerships to develop Important Elements of the ecosystem that can support scale.
In contrast, the relatively young New York worker cooperative community has won substantial funding and policy supports, but struggles to develop capacity in cooperative development and management to meet the demand it is mobilizing. Having convened a strong coalition, local actors now have a mandate to create sustainable, scale-oriented co-ops and co-op development initiatives. This ecosystem’s greatest priority, then, is strengthening Essential ecosystem elements such as financing, technical assistance, and co-op development capacity.
A case study of the fictional Any Town USA shows a local coalition starting from scratch and developing a robust Cooperative Growth Ecosystem over the course of fifteen years. We imagine many communities could learn from this generalized example. The Any Town group starts with assessing their ecosystem, then considers three approaches—community planning, lean startup, and conversions—and moves quickly to a small-scale co-op development project, from which they hope to demonstrate proof of concept and launch larger initiatives. This case study projects out fifteen years, showing how to engage more and more actors and elements in the ecosystem to support greater size and density of cooperatives.
5 Recommendations
Our findings point to an ecosystem-building approach that jumps in quickly to the hard work of building cooperative businesses, while also developing system-wide entrepreneurial lead- ership skills and clearly defining the ways that other ecosystem actors can be instrumental to this business development. In early-stage ecosystems, it is critical to strengthen the Essential Elements of the ecosystem: build member skills and capacity, mobilize appropriate capital, pair capital with cooperative-specific technical assistance, and increase the capacity of cooperative developers. Diverse actors can amplify the work of growth-oriented cooperative developers in a variety of ways. For example:
Economic development and workforce develop- and a variety of patient capital sources to support ment practitioners can collaborate with prospec- co-op development.
tive cooperative developers to provide member Worker cooperatives can invest in their own en- training and small business supports and to trepreneurial leadership and connect more broad- develop market access opportunities. ly to allies, understanding that they play a critical Social movement allies can work with other direct role in building local ecosystems for scale.
actors in the ecosystem to co-create campaigns Educational institutions can take on multiple for inclusive economic development that creates roles in an ecosystem—as research centers, market opportunities for worker cooperatives. anchor institutions, and key capacity-builders Local governments, capital providers and for cooperative development skills and expertise, philanthropic funders can invest in supportive particularly building management and entrepre- infrastructure such as business advisory services, neurial leadership capacity.
Cooperative developers should not struggle in isolation to launch one business or even five businesses, but aim toward concrete wins— successful cooperatives—to build toward a longer-term tipping point—density of high-impact cooperatives within an ecosystem of support.
6 1. Don’t try to do it alone, and learn from previous efforts SOME 2. Build Essential Ecosystem elements, including worker WORDS OF cooperatives themselves 3. Collaborate strategically by understanding your best role ADVICE in the ecosystem 4. Think “ecosystemically”
The past several decades of sustained growth in worker cooperatives offer us clear lessons. One such lesson is that deeper investment—not only in building cooperative businesses but in the supportive ecosystem itself—is needed to fully realize the promise that worker cooperatives offer our communities. Anyone interested in the potential of worker cooperatives as an inclusive economic development strategy should begin by investing in building this ecosystem.
Understanding early-stage ecosystem development work as long-term investment in a Cooperative Growth Ecosystem framework can help keep the focus on development of sustainable worker cooperative businesses. In this approach, cooperative developers are not struggling in isolation to launch one business or even five businesses, but building toward a longer-term tipping point, the density of high-impact cooperatives within an ecosystem of support. One eye is always on the next stages: Consolidate gains and Sustain the model.
A growing movement of diverse actors has begun to shift the economic development discussion toward fostering sustainability and reducing inequality. Worker cooperatives can accelerate this change by combining economic growth and community well-being in a practical business model that meets the day-to-day income needs of workers while creating business ownership and wealth building opportunities. Using the Cooperative Growth Ecosystem framework, thoughtful and well-designed strategic collaborations can support scale-oriented cooperative development by nurturing elements that build strong worker cooperatives. These strategic collaborations can create substantially more worker-owners from low-income backgrounds, enhancing economic resiliency in the communities where they live and work and demonstrating a new strategy for building truly strong local economies.
7 Elements of an Ecosystem Elements of an Ecosystem
Essential Elements: Building Blocks For Scale
• Management skills and expertise SKILLS • Core job skills and governance skills & CAPACITY • Growth-oriented entrepreneurial leadership
• Availability/experience of loan capital FINANCING • Availability/experience of investment capital (equity) • Availability/experience of grant funding
TECHNICAL • Supply, quality and affordability of ASSISTANCE professional service providers
COOPERATIVE • Co-op developers—experience, business acumen, scale orientation DEVELOPERS • Co-op networks/associations
Important Elements: Accelerate Growth
BUSINESS • Business advisory services, incubators, industry peer networks SUPPORTS • Quality, accessibility of public workforce, economic development programs
• Anchor institutions and key clients CONNECTION • Supply chain possibilities and connections TO MARKET • Key industries for cooperative development • Local government contracting & community benefit agreements
• Tax/business barriers/incentives POLICY • Government funding or support • Pro-cooperative laws/regulations
• Government officials advocating for co-ops ADVOCACY • Shared issues, partnerships with social movements PARTNERSHIPS • Advocacy by worker-owners, co-op movement, partners
Environmental Elements: Legitimize And Popularize
VALUES-DRIVEN • Strength, embeddedness, and reach of worker co-op sector BUSINESSES • Other co-ops, B Corps, ESOPs, social enterprises
ATTITUDES • Desire/momentum for change & CULTURE • Cooperative awareness
COOPERATIVE • Institutional education programs EDUCATION • Integration of co-ops into SBDCs and entrepreneurship education
8 ©Democracy at Work Institute and Project Equity 2016 Worker 1
In the wake of the economic crash Cooperatives as of 2008, widespread dissatisfaction with prevailing economic models spurred a groundswell of interest in a Community new approaches, including worker cooperatives. Since then, calls for Economic inclusive growth have only grown more persistent, and are now part of the mainstream political dialogue.4 Development As cities across the United States rethink their approach to economic development, they are trying new Strategy strategies and tools to promote sustainability and inclusion. From city halls to community colleges to community development financial institutions, various municipal and regional actors are engaging with worker co-op development as a way to address growing income and wealth inequality.
US WORKER COOPS BY THE NUMBERS
Est. Number of Worker Cooperatives 350 enterprises Est. Total Workforce 7,000 people Est. Total Revenue $367 million Median Revenue $282,480 Median Number of Employees 10 people
GROWTH & DEMOGRAPHIC TRENDS 60% of worker co-ops have formed since 2000 31% of worker co-ops have formed since 2010 60% of new worker-owners since 2010 are people of color 68% of total worker-owners are women
9 Growing Interest
Worker cooperatives provide an inclusive, place-based community economic development strategy that improves job quality and wealth-building opportunities for low- and moderate-income workers.5 Cooperatives are businesses owned and controlled by their members, who rely on them to meet shared community needs—for goods and services, housing, or jobs. Cooperative business forms have long been key to community economic development in other parts of the world and have been used as a self-help strategy in urban, rural, Black, white and immigrant communities going back centuries in the United States.6 In recent decades, worker co-op development has emerged as a strategy to leverage the well-known benefits of local business ownership for a broader and deeper impact in U.S. communities. Worker cooperatives, which may have provided earlier generations with an alternative to mainstream employment, are now largely being used as vehicle for those locked out of good jobs not to exit the economy but to enter it.
Today, innovative cooperative development efforts are taking place around the nation, and worker cooperatives, in particular, are in high demand. Workers want jobs and to own their own businesses; city economic development officials want sustainable, locally based companies; social movements want a positive alternative to hold up; nonprofits want to respond to their constituents’ need for dignified work; and baby boomers want to retire and see their companies continue to thrive.
Despite this growing interest in worker cooperatives, there is little shared understanding of what these businesses need to launch, develop, and grow. The challenge is to meet this growing interest with two kinds of resources: an adequate supply of technical expertise, appropriate capital, and entrepreneurial leadership to create successful worker cooperatives; plus public awareness, education, advocacy and a supportive policy environment to foster a thriving ecosystem for cooperative business development.
POWERFUL IMPACT
As businesses centered on member and community benefit, worker cooperatives, when thoughtfully structured and well-implemented, can offer three distinct advantages: (1) They can create high-quality locally rooted jobs; (2) They can democratize wealth and address inequality at its root in the ownership of productive assets; and (3) They can build skills and leadership among workers who traditionally have limited access to these opportunities. Moreover, because they are market-based business entities that generate profits, they can be a self-sustaining strategy for economic development.
The positive impacts of worker ownership at the individual, enterprise, and industry levels have been well documented, both by individual worker co-ops and in a robust body of research about Employee Stock
10 Ownership Plans. For low-wage service workers, worker A growing body cooperatives can boost incomes substantially and stabilize of research and volatile jobs in high-turnover industries. One network experience points to of green housecleaning co-ops, for example, increased the powerful impact household incomes as much as 80% and individual incomes of worker ownership by more than 150%.7 And a cooperative of thousands in improving company of home care workers has only 15% employee turnover performance, raising versus the industry average of 40-60%.8 A growing body of standards in low-wage international research also points to the powerful impact of industries, and even cooperative ownership in improving company performance positively affecting and longevity and even positively affecting public health.9 public health. The additional community benefits of local business ownership are well known. Research shows that beyond economic benefits, local business builds social capital and community efficacy. According to the Institute for Local Self-Reliance, “Sociologists have found that neighborhoods where a large share of the economy is in the hands of locally owned businesses have higher levels of social capital and a higher degree of ‘collective efficacy’—meaning that residents are better able to act together to solve problems—compared to places dominated by outside companies.”10 These benefits are amplified when local ownership is also worker ownership, with its high degree of participation and engagement, and when the worker-owners are people who might otherwise have limited leadership opportunities on the job.
DIVERSE APPROACHES
There are multiple pathways to increasing worker At one end of the spectrum of co-op development ownership: creating new cooperatives, growing existing models, a group of entrepreneurs comes together cooperatives, and converting conventionally owned to start a cooperative business, often as a self-help businesses to worker-owned structures. Cooperative strategy. They initiate the idea, make the investment, worker-owners can undertake these processes inde- and take the risk to launch the business and ensure its pendently or in partnership with a co-op developer, ultimate success. The role of a cooperative developer usually a nonprofit organization but in some cases in this case is relatively “low-touch”: the developer may a secondary co-op.11 The term “worker cooperative help facilitate the process, provide training, and help development” encompasses a range of activities, from entrepreneurs access resources, from capital to techni- general support for shared entrepreneurship to incu- cal assistance. When critical capacities, such as deeply bation of new businesses and support for businesses supportive policy, protected markets via preferential that are converting to worker cooperatives. The devel- procurement, and large pools of friendly capital, are opment approach may be determined by who initiates present in the ecosystem of support, these low-touch the endeavor and what impact they are aiming for, as approaches can succeed at a scale that has impact on well as by the experience, resources, and needs of the community economic development. This is the case in cooperative’s eventual members. several European regions and Quebec, for example. 11 At the other end of the spectrum, the entrepreneurial actor is the co-op developer itself. There are multiple pathways The developer makes the investment, takes the to increasing worker risk, and garners the expertise to start, grow, or ownership: creating new convert a cooperative business, bringing in worker- cooperatives, growing owners and expanding ownership of the enterprise existing cooperatives, and over time. The developer provides more in-depth converting conventionally and comprehensive services over a longer period owned businesses to of time and often has substantial control over the worker-owned structures. process and outcomes. This approach, also called “incubation” or a “high-touch” approach, generally aims for community economic development impacts: to create quality jobs for low-wage workers, to build assets, and ultimately to reduce poverty. When these initiatives are designed for scale and co-op developers have critical assets, such as business expertise, entrepreneurial leadership, an industry- or sector-specific growth strategy, and access to growth capital, co-op development can achieve deep impact on workers, families, and communities.
As with other community economic development efforts, deeper investment in cooperative development can create deeper impacts for people who lack access to investment capital, advanced education, or the social capital that creates connections to business opportunities. In this case, successful developers bring a complex set of skills, including entrepreneurial business growth experience, participatory management, and the ability to train and build capacity in others; leverage other essential resources, such as financing and technical assistance; and identify committed workers who will become the cooperative’s members. For the purposes of this paper, we focus on those growth-oriented cooperative development activities that we believe are most likely to support scale and associated community economic development impacts: incubated and high-touch/high-investment models.
DIMENSIONS OF SCALE
Worker cooperatives have had profound impact on society in places where they have reached significant scale. Examples of this scale exist primarily outside of the United States, in Europe, Quebec and Latin America (one notable exception is Cooperative Home Care Associates in the Bronx, which has had considerable impact on the home care industry). When we talk about scale, we are referring to several factors: the size of individual cooperatives, the density of worker co-ops in a region, and their impact on a community or industry. While the size of an enterprise is not in and of itself a recipe for success, it is undeniably an ingredient in the stability, longevity, and capacity of worker cooperative businesses. Density of worker cooperatives in a given place seems to have a powerful multiplier effect, generating and mobilizing resources that support further growth in number of enterprises. Finally, the impact of worker cooperatives in building wealth and creating quality jobs for low-wage workers is perhaps the most important way that we think about scale.
12 The 2
Ecosystem thinking has become Cooperative popular among entrepreneurship advocates in the past decade. For proponents of worker cooperatives, Growth the Cooperative Growth Ecosystem framework helps us bridge the gap Ecosystem between the proven benefits and growth potential of worker-owned businesses and the current reality Framework that there are only about a dozen larger worker cooperatives (with 50 or more employees) in the U.S. today.12 The field of worker cooperative development is still nascent, and none of the local ecosystems to support it can be considered mature— that is, with all elements from capital to policy to business supports working together strategically to achieve such scale and density that worker cooperatives constitute a measurable part of the economy.
For us, the question is not whether a given place already has the ecosystem elements to support thriving worker The question is not cooperatives—we believe that all places have this potential— whether a given but which elements are strong in a place and how they can place already has the be used to build more capacity. The ecosystem itself does not ecosystem elements create worker cooperatives. Entrepreneurs, whether they are to support thriving individual worker-owners or cooperative developers, create worker cooperatives… worker cooperatives. These cooperatives in turn create the but which elements ecosystem of support they need. But imagine the possibilities are strong in a place if these cooperatives were not solely responsible for building and how they can be their supportive ecosystem. What scale might be possible if used to build more cooperative developers and entrepreneurs worked alongside capacity. other actors in a coordinated strategy to build a more favorable ecosystem for worker cooperatives?
The Cooperative Growth Ecosystem framework helps diverse local actors determine what roles they can successfully play, design effective collaborations and develop strategy with other actors, and create initiatives that will have real impact and be able to scale. The framework includes actors and elements, as well as common stages that local ecosys- tems may cycle through when actors are working together to pro-actively cultivate the ecosystem.
13 Actors in a Cooperative Growth Ecosystem
Actors in the Cooperative Growth Ecosystem include the people, organizations and institutions that are engaged, or could potentially engage, to support the development, growth or conversion of worker cooperatives, either directly or indirectly. They span the private, public, nonprofit and financial sectors. The chart shown here, while not all encompassing, suggests the many actors we see populating and developing the ecosystem in each of these sectors.
FINANCIAL SECTOR PUBLIC SECTOR Community capital Economic developers Community Development Government agencies Financial Institutions (CDFIs) Policymakers, elected officials Credit unions Small Business Development Foundations Center Impact investors Workforce development organizations ECOSYSTEM ACTORS
NONPROFIT SECTOR PRIVATE SECTOR Colleges/universities Anchor institutions Community-Based Organizations Businesses, including co-ops Community Development Local business groups Corporations Professionals and TA providers Cooperative developers Secondary cooperatives Faith groups Labor and workers’ centers
Elements in a Cooperative Growth Ecosystem
The Cooperative Growth Ecosystem has eleven elements in all, in three major categories. Essential Elements are the building blocks for robust growth, and scale cannot be achieved without them. Important Elements support growth and can be key drivers or supports for scale initiatives. Environmental Elements legitimize and create demand for worker cooperatives, but do not in themselves support growth or scale. It is important to note that we do not see these parts of the ecosystem evolving in a necessarily linear or sequential fashion; we believe the process is iterative and dynamic. In fact, many ecosystems may begin with a concentration of Environmental Elements or a few Important Elements, and as they develop, they create more Essential Elements.
14 ESSENTIAL ELEMENTS
MEMBER SKILLS AND CAPACITY What this element is: This element addresses the workforce at multiple levels. Other co-ops struc- the heart of worker cooperatives—the people ture management functions across teams or multi- who work in them day to day. It includes ple positions. In general, worker cooperatives tend to existing skill levels and available training in three areas: underinvest in management talent and management (1) core job and business functions, (2) cooperative- training. Where co-ops do invest in building entrepre- specific practices, such as democratic governance, and neurial leadership and management skills, the result is (3) management and entrepreneurial leadership, which business growth and benefits for the entire ecosystem, we see as essential to growing both individual worker as leaders bring their skills to new co-ops and co-op co-ops and a broader worker co-op sector. development efforts.
In order to grow beyond a very small Why it matters: KEY INSIGHT: The critical role of mission-driven size and build community wealth, worker co-ops need management to effectively exercise management functions, such as Skilled participatory management is a common success planning, market positioning, hiring, and accountabil- factor among the worker co-ops that have created measurable economic benefits for low-wage workers. ity; governance functions, such as strategy and policy Examples include Cooperative Home Care Associates, development; and entrepreneurial leadership to drive Opportunity Threads, Alvarado Street Bakery, and the green growth and smart risk-taking. A thriving worker co-op cleaning cooperatives developed by WAGES (now Prospera). will have entrepreneurial drive among many work- In each case, business-savvy, mission-driven managers led er-owners and may or may not have dedicated man- business growth and supported the training and development agement positions. When worker-owners have low levels of all co-op members. These examples suggest that of formal education, limited business experience, or developing management capacity should be a high priority for Cooperative Growth Ecosystems. multiple barriers to employment, experienced managers can bring business expertise and also cultivate entre- To learn more, see Sherman Kreiner, “Sectoral Strategies in preneurial leadership among all cooperative members. CED: Critical Factors in the Success of CHCA and Childspace,” (Canadian Centre for Community Renewal, 2003), http:// communityrenewal.ca/sectoral-strategies-ced, and Abell, Current state: Many growth-oriented worker co-ops Worker Cooperatives: Pathways to Scale, pages 24–26 and have managers with fairly traditional job descriptions 31–33. and a participatory management style that engages
FINANCING What this element is: In order to meet non-member investments such as non-voting pre- community economic development goals, ferred stock can play an important role in supporting a robust Cooperative Growth Ecosystem expansion of existing cooperatives. Community and needs ample amounts of patient capital in crowdsourced capital, from Kickstarter to direct pub- a variety of forms,13 including: lic offerings, can provide initial investment for start- Equity: Equity includes internal equity (member ups or funding for special projects or strategic needs. investment and reinvested profits) and external Debt: Many worker co-ops take out loans from equity (outside investment). Though not common, community development financial institutions (CDFIs)
15 and cooperative-specific revolving loan funds. Larger, A growing number of worker co-ops are using direct well-established worker co-ops are often able to public offerings to generate equity financing. Grants to access lines of credit or loans from traditional banks. cover startup technical assistance and training remain Grants: Philanthropic capital can drive worker co- the primary source of investment in nonprofit co-op op development through grants to nonprofit co-op developers, most of whom are developing cooperatives developers working in low- to moderate-income in the service industry with low capital requirements. communities. Grants generally pay for training, Nonprofit cooperative developers remain generally management, administration, and other support under-resourced. services needed to start and grow co-ops with low-income first-time entrepreneurs. Philanthropic KEY INSIGHT: Financing needs are more complex than capital can play a key role in mitigating risk for meets the eye investors and lenders by funding robust technical Capital providers active in the co-op space consistently say assistance and support. It is not typically used to that they do not have sufficient “deal flow” to deploy the purchase equipment or build cash reserves. debt capital they are willing to provide, and point to a need for in-depth technical assistance, and often the support of a co-op developer, to help worker cooperatives become “ready” Why it matters: Financing is essential for the startup to borrow or accept equity investment. Today, most “loan and growth of all businesses, and worker co-ops, while ready” small worker co-ops can meet their debt financing no exception, experience unique challenges in this needs through CDFIs or co-op specific loan funds. Most area that can limit their growth unnecessarily. Experi- credit unions are not active small business lenders, but in enced cooperative developers have identified absence Madison and Cincinnati, credit unions have made loans to of equity, and thus over-reliance on debt, as a primary worker co-ops. In Western North Carolina, Self-Help Credit reason for the undercapitalization and resulting failure Union has helped Opportunity Threads’ members save and of worker co-ops in the past. Conversely, values-aligned build individual assets. outside investment has been a catalyst for growth in a The greater challenges are: (1) funding the technical number of worker cooperatives, as has grant funding for assistance and co-op development services that can help successful co-op development efforts in low-income worker co-ops with low-income worker-owners access communities. capital and use it effectively to start, grow and scale; and (2) meeting the more complex capital needs of growing Current state: Loans are the most common form of and growth-ready worker co-ops with sufficient amounts of outside capital that worker coops access, yet most values-aligned equity investment. Two examples illustrate how grant funding for cooperative developers can increase traditional lenders do not understand the cooperative cooperatives’ ability to access capital: the Catholic Campaign model, and pose additional hurdles to cooperative for Human Development supported The Working World to borrowers. Regional and national cooperative lenders provide technical assistance to the low-income worker and community development financial institutions cooperatives in the Rockaways in which The Working World (CDFIs) thus play a critical role in providing capital to was investing; and Citi Community Development provided worker co-ops, especially those that benefit low-income funding over two years to Urban Upbound, in part to evaluate communities. Larger worker co-ops like Equal Exchange capital needs of different cooperative opportunities resulting in Urban Upbound’s development of the On Point Security and Namaste Solar have had great success with non- cooperative in Queens. voting preferred stock, which returns modest dividends to shareholders. Startup and conversion worker cooperatives have accessed community capital through platforms such as Kickstarter, Kiva Zip, and others.
16 TECHNICAL ASSISTANCE What this element is: Technical assistance co-ops around the country, we see TA providers (“TA”) includes attorneys and accountants encouraging and mentoring local colleagues in the (CPAs) who have specific knowledge of field, and recent efforts to convene co-op lawyers and worker cooperatives. Other less recognized but equal- CPAs on a national level. ly important types of technical assistance include organizational development, conflict resolution or REGIONAL EXAMPLES: Building an ecosystem of technical mediation, human resources, governance, and gener- assistance providers In the Bay Area, the community of lawyers trained in al business advice. cooperative law has grown, thanks to dedicated individual attorneys mentoring new entrants, and to the recent work of Why it matters: Technical assistance is critical for the Sustainable Economies Law Center and the Green Collar worker cooperatives, given their unique and some- Communities Clinic of the East Bay Community Law Center. what complex organizational, legal, and capital As a result, legal TA is now highly accessible through free structures. Cooperative-knowledgeable attorneys legal clinics and legal representation for co-ops serving low- have historically played a strong development role in income communities, and through lawyers in private practice. New York City also has several legal clinics serving worker startup worker cooperatives. Co-ops also need knowl- cooperative startups, and these could be leveraged to train edgeable local TA providers throughout their life cycle, private practice attorneys who could accompany a co-op as growth brings new challenges in diverse areas throughout its life cycle. In Madison, a network of experienced such as human resources, commercial property ne- legal and accounting service providers has developed to gotiations, regulatory issues, restructuring of bylaws serve the worker co-op community, and the University and equity, dispute resolution, and capital planning. of Wisconsin Center for Cooperatives provides support for governance, strategic planning, and organizational development. On a national level, the Democracy at Work Current state: Where it does not exist locally, co-ops Network trains worker co-op members to provide peer and developers seek technical assistance from technical assistance to other co-ops. providers in other regions. With the growth of worker
CO-OP DEVELOPERS What this element is: The co-op developers administrative support, including back-office services. element is unique to our Cooperative Developers that aim to create larger or multiple Growth Ecosystem. Most worker co-ops job-creating worker co-ops bring an explicit growth that create quality jobs for low-wage workers orientation and usually provide the full spectrum of and many of the larger worker co-ops14 in the services, make or broker capital investment in the country were formed through an explicit process of cooperative, play a stronger role in co-op management, incubation and acceleration whereby a third party— and often have voting or non-voting seats on co-ops’ either a nonprofit co-op developer or an association boards of directors for some period of time. of cooperatives—brings critical capacity to the table and drives the co-op’s growth. Co-op developers Why it matters: Co-op developers are an essential provide some or all of the following services for the element of our ecosystem because they play a key cooperatives they support: recruitment and training role in the development and growth of co-ops that of worker-owners, technical assistance, direct support work with low-wage workers and fulfill community to co-op governance, management services, and economic development objectives. 17 Build with Prospect is a Brooklyn-based construction business that transitioned to a worker co-op structure in 2014. Photo c/o Myleen Hollero
Current state: More and more organizations are KEY INSIGHT: The importance of business skills—among others—for co-op developers getting involved in worker co-op development, and Whether formal training, lived experience, or simply a there is a growing diversity of approaches,15 as well “good head for business” and an entrepreneurial mind-set, new training and capacity-building programs for strong business skills on the development team are what worker co-op developers. The rarest skill set among have distinguished successful co-op development projects. worker co-op developers in the U.S. today is actual However, developing or recruiting co-op developers for experience in business growth and scaling. Training, business skills alone is not adequate. Because they have facilitation, organizing, and conflict-resolution skills an explicit commitment to growth and sustainability of the co-ops they support, cooperative developers must prioritize are more common. Developers that have developed developing entrepreneurial capacity among worker-owners. worker cooperatives of significant scale have This requires that developers also have mission drive and well-rounded capacity in both business and strong people skills. human development.
18 IMPORTANT ELEMENTS
BUSINESS SUPPORTS What this element is: The business supports programs provide no information or advice about element of a Cooperative Growth Ecosystem the cooperative business form. Some worker co-op contains both private and public supports: advocates have begun the critical work of educating (1) advisory services, business networks, industry- business service providers. Some larger cooperatives, specific trade and manufacturing associations, such as Cooperative Home Care Associates, have incubators and accelerators, and microenterprise integrated into the workforce development system, development organizations; and (2) public workforce but this connection remains relatively rare. and economic development programs. REGIONAL EXAMPLES: Building an ecosystem of Why it matters: Accessing the mainstream business technical assistance providers supports that have helped small businesses of all “Coop Academies” are becoming a popular way to support small worker co-ops in many metropolitan regions. In the Bronx, kinds play a vital role in our economy is important for Green Worker Cooperatives’ Coop Academy has partnered broader uptake of the cooperative model. In a robust with Workshop in Business Opportunities (WIBO), and in ecosystem, business advisors would include co-ops on Oakland, the Bay Area Worker Coop Academy is partnering the menu of business forms available to entrepreneurs, with Centro Community Partners, a local microenterprise provide basic advice to cooperative businesses, refer support organization, to provide a general business curriculum. clients to service providers with expertise in worker Partnerships like these leverage the experience of the co-ops, and become partners in advocacy efforts that microenterprise field and allow co-op experts to focus on overall program design and cooperative-specific curriculum. integrate cooperatives into a broader spectrum of small business and workforce development strategies. Government programs for small businesses are also entering Connecting to existing infrastructure and funding for the fray. In the course of providing funding for worker co-op workforce development could be a scale strategy for development, the City of New York is integrating cooperative worker cooperative developers focused on low-income support services into its Department of Small Business and semi-skilled workers. Services (SBS), a critical agency in a city where more than 95% of businesses are considered “small businesses.” SBS has an annual budget of over $100 million, works with more Current state: Generally speaking, worker than 200,000 small businesses, and recently partnered cooperatives have had little interaction with with Citi Community Development to launch the citywide entrepreneurial support programs and small business Immigrant Business Initiative. and industry networks, and most such
CONNECTION TO MARKET What this element is: : The connection-to- Anchor institutions such as universities and market element of a Cooperative Growth hospitals, Ecosystem focuses on special connections Early mission-aligned customers or other major to market through strategic partnerships players along the supply chain, and with key institutional customers that can help them Publicly funded entities that have socially or grow and diversify, including: environmentally driven purchasing policies. 19 Maru Bautista, Center for Family Life, Brooklyn, NY. CFL is training and building capacity of new cooperative developers through its CBO Training Program. Photo c/o Myleen Hollero
Why it matters: Having a sound market strategy for anchor institutions to fulfill their institutional and connecting successfully with customers are mission to purchase locally, support small fundamental activities of any successful business, businesses, and invest in the health and well-being of but focused strategies to open new markets can the communities in which they are located. spur growth more quickly. Conventional businesses develop protected and proprietary markets through REGIONAL EXAMPLES: Increasing market share with all means available to them, including personal industry-specific strategies relationships, policy influence, and preferential The worker co-op Opportunity Threads plays a leading role in purchasing policies, and cooperatives can also the visionary Carolina Textile District, which aims to “revitalize benefit from such strategies. the American textile industry in a way that builds on local people, assets and heritage.” The District brings together manufacturers, stitchers, printers, and professionals serving Current state: Where worker cooperatives and entrepreneurs and established businesses in Western North co-op developers have seen and seized these Carolina’s textile industry, and is an exciting example of opportunities, they have often been able to leverage a worker co-op creating connections to market through them for substantial growth. For co-ops with low- supply-chain organizing. wage workers, cooperative developers can play a valuable role in bringing the social capital and Cooperative Home Care Associates designed a powerful con- nection-to-market strategy beginning with its early contract business connections needed to identify and open with a key mission-aligned client (Visiting Nurses Associa- unique markets. A critical lesson learned from recent tion) and culminating in its incubation of a market-facing cooperative development strategies using an anchor sister company (Independence Care Systems) that provides institution model is that there may be a mismatch it with a steady stream of new business. CHCA’s iterative between startup cooperatives and the needs and strategy of growing its business to meet its key customer imperatives of anchor institutions. At the same needs demonstrates what makes connection-to-market time, worker cooperatives may have a competitive strategies successful. advantage, as they present a unique value proposition
20 POLICY What this element is: Policy supports for worker cooperatives are still in their early phases. worker co-ops at the local, state or federal Advocacy for cooperatives currently has the greatest level could include the following: momentum at the municipal level, where the focus Public funding for growth-oriented co-op has been on city funding for co-op development, developers and high-quality technical assistance and at the state level, where the focus has been on Incentives or tax benefits for cooperatives, or drafting “enabling legislation” (corporate formation adaptation of other business incentive programs, statutes making it possible to form a cooperative such as local or minority- and women-owned corporation) and promoting employee ownership businesses, to suit co-ops more broadly via state centers. Pro-cooperative procurement policies that create markets through government purchasing Removal of administrative barriers to co-op REGIONAL EXAMPLES: Increasing market share with industry-specific strategies formation 2014 and 2015 were breakthrough years for government Supportive regulatory frameworks support of worker cooperatives. Two cities—New York City and Madison—have allocated millions of dollars to support worker Why it matters: In parts of the world where worker co- co-ops. In New York, a coalition of several worker cooperative ops have become a measurable part of the economy, organizations and a key policy partner leveraged connections such as Quebec, Northern Italy, and France, public with the new mayor’s office, worked with City Council members, and mobilized grassroots action to push for policy has played a significant role, encompassing $1.2M in city funds in 2014 and $2.1M in 2015. In Madison, a range of policies, from basics such as standard the Common Council approved $5M over five years from corporate entity definitions and public funding for the city’s capital budget. Funds will be deployed starting in co-op development, through to more complex policy 2016, primarily as low-interest or forgivable loans, likely with such as providing tax incentives for cooperative set-asides for technical assistance and co-op development ownership and linking unemployment insurance to services, and potentially a small portion for public education. equity investment in startup cooperatives. Cooperative advocates in the Bay Area have begun a process of government engagement, with a new California state worker cooperative corporation statute just signed by the In the United States, policy supports Current state: governor, a city proclamation recently made in Oakland, and a for worker co-ops are generally weak and efforts to resolution pending before the Berkeley City Council. develop local, state and national policies to support
In parts of the world where worker co-ops have become a measurable part of the economy...public policy has played a significant role.
21 ADVOCACY PARTNERSHIPS What this element is: Advocacy partner- Current state: Worker cooperatives are just beginning ships can advance supportive policy and to form advocacy partnerships and to understand public awareness. Worker co-ops currently themselves as a potential political force. Though have working alliances with other cooperative sectors, many individual cooperatives have maintained selected small business associations, and localist industry-based or mission-related partnerships, for groups. Recently they have begun to develop a broad decades the worker cooperative community as a range of potential advocacy partnerships with com- whole was largely unconnected to advocacy efforts. munity organizing groups, to be a positive alterna- This began to change in the early 2000s with the rise tive for community empowerment. These nascent of the sustainable small business community and alliances include partnerships with labor unions and the growth of organizational infrastructure within employee ownership organizations to advocate for the worker cooperative community, and has gained quality jobs; and with New Economy, impact invest- momentum since the Great Recession. ment/social capital, racial justice, and sustainability groups to position worker cooperatives as a pathway REGIONAL EXAMPLES: Partnering with social for creating a fairer economy for all. movements In Cincinnati, the two existing co-op developers have deep Why it matters: Since the Great Recession began ties to social movements—one to organized labor and the in 2008, public demand for fairer business models other to grassroots community organizing linked with faith has grown, and many community organizing and communities. Considering the reach and power of these movements, incorporating these partners as strategic advocacy organizations have become interested in drivers of growth—to access markets, mobilize capital, worker cooperatives. Such organizations can play an and connect to workers—could be a pathway to scale. In important role in galvanizing public support for co- Madison, alliances forged between worker cooperatives and ops and advocating for funding for growth-oriented the South Central Labor Council, in part through shared worker co-op development (Essential Elements) advocacy efforts at the state level, have opened important and for policies and special market connections opportunities for scaled growth. In New York City, the (Important Elements) that can help bring the worker Federation of Protestant Welfare Agencies’ commitment to a broader New Economy strategy animated the campaign for co-op sector to scale. city funding for worker cooperatives.
Community organizing and advocacy [groups] can play an important role in galvanizing public support for co-ops… advocating for funding, policies and special market connections.
22 ENVIRONMENTAL ELEMENTS
VALUES-DRIVEN BUSINESSES What this element is: This element includes Current state: Collaboration with other kinds of values- the strength of the existing worker co-op driven businesses remains relatively unexplored for community in a region, including any formal smaller worker co-ops, though the larger worker networks or infrastructure supporting it, as well as the cooperatives often have business relationships or number of other kinds of values-driven businesses and industry partnerships. In general, these collaborations their level of engagement. Some like-minded business are currently most developed among worker co-ops models include: themselves, and between worker co-ops and the other Other kinds of cooperatives, such as consumer co- cooperative sectors, in part because of their explicit ops, food co-ops, credit unions, rural electric co-ops, commitment to “cooperation among cooperatives,” and business-to-business or purchasing co-ops which is codified as a cooperative principle.18 Employee Stock Ownership Plans or ESOPs16 Certified B Corporations17 REGIONAL EXAMPLE: The power of businesses in community or Other kinds of “triple bottom line” businesses With 56 worker co-ops, the majority of them in existence for social enterprises more than 20 years, the Bay Area worker co-op community plays an important role in its own growth. Established co-ops Why it matters: Success breeds success. Businesses mentor new ones, new co-ops spin off from old ones, and that have values woven into their DNA tend to do things some co-ops provide loans or grants to others. a little differently and to embrace and encourage There is also a large contingent of Certified B Corporations like-minded companies. Worker cooperatives have a long (130 in total) and ESOP companies (300) in the Bay Area, tradition of supporting each other by sharing best prac- including some well-known 100% ESOPs, such as Zachary’s tices in cooperative-specific areas such as democratic Pizza and Recology. One B Corp gave a seed grant to Project governance, providing financing to startups, lending to Equity, a scale-oriented co-op development organization, one another, collaborating on training, doing joint market- and B Lab, the organization that certifies B Corps, has ing and purchasing, and creating solidarity funds to help partnered with Democracy At Work Institute to pilot the use one another through rough times. Extending this cooper- of the B Impact Assessment tool among worker co-ops. The Bay Area’s vibrant values-driven business community ative habit—which makes good business sense as well as could potentially provide business capacity, resources, and values sense—to other forms of allied businesses would connections to market to help worker co-ops flourish. expand worker cooperatives’ reach and relationships.
ATTITUDES AND CULTURE What this element is: This element includes Why it matters: In places where cooperatives are distinct components that can help create a embedded in the local culture to a great degree, we needed cultural shift: general awareness of see several positive effects: consumer loyalty, advocacy cooperatives among businesses, social movements, strength, institutional support, cooperative develop- and the public; coverage of co-ops in mainstream and ment as an accepted strategy for community economic alternative media; the presence and visibility of suc- development, and ultimately more people starting their cessful co-ops in local communities; and local support own small businesses as cooperatives. for alternative economic models. 23 Enma Giron, a worker-owner at La Mies Bakery, Rockaways, NY. Worker cooperatives are helping rebuild the local small business community in the Rockaways after Hurricane Sandy. Photo c/o Myleen Hollero
Current state: Misconceptions persist that may keep as personal responsibility and the common good; they cooperatives from gaining mainstream traction: that can be quite large,19 they use a variety of decision-mak- “co-ops are just for hippies”; that all cooperatives ing structures; and they are generally profitable busi- are small; that all co-ops make decisions based on nesses. Worker cooperatives have potentially wide consensus; and that cooperatives are grant-seeking appeal as a principled and practical business form that nonprofit entities. In fact, cooperatives appeal to values is values-based but non-ideological—but only if they that are embraced across the political spectrum, such are seen as a “normal” option.
REGIONAL EXAMPLE: The importance of cooperative awareness Public awareness and acceptance of cooperatives will play Network lobbies for co-ops of all kinds; and in the recent an important role in moving them into the mainstream of mayoral election, cooperatives played a key role in getting out community economic development. Co-ops are common the vote for the candidate who supported cooperative economic and considered “normal” in Madison and throughout the development strategies. Upper Midwest, for example. Worker co-ops have a visible and measurable presence in Madison, employing between 0.3% With public awareness of inequality growing, we see potential and 0.4% of the city’s workforce. The “multiplier effects” of this for growing support for the leading edges of worker co-op public awareness are many: loyal customers, many of them expansion in Madison: co-op development efforts in low-income members of multiple co-ops, choose to spend their money at communities and government support for cooperatives as a tool cooperatives; talented workers choose to build their careers in to build and anchor community wealth. worker cooperatives, moving up skill ladders and into leadership positions; the publicly funded University of Wisconsin Center for Cooperatives provides invaluable support; the Cooperative
24 COOPERATIVE EDUCATION What this element is: This element values, awareness and connection to cooperative encompasses education about worker movements. Some undergraduates learn about co-ops cooperatives within formal educational by living in student housing co-ops, and students of institutions (graduate, undergraduate and K-12), and social science, law, and industrial relations occasionally the degree to which worker cooperatives are included get exposure to the cooperative model. A few courses in entrepreneurship education and community have launched in the past few years, including most training programs. recently a cooperative management certificate program at Pinchot University in Seattle. But, with the Why it matters: Educational institutions have an exception of Pinchot’s new program, co-ops are largely important role to play by educating the general invisible in business schools, whose graduates could population for long-term culture change, training be well positioned to launch and grow scale-oriented business leaders to lead cooperative businesses, and worker co-ops. fulfilling the research needs of a growing cooperative business community. In other parts of the world REGIONAL EXAMPLES: Early steps toward cooperative where worker co-ops thrive in much larger numbers, education educational institutions are an active part of the Cooperative education is becoming more common in both cooperative ecosystem, teaching students at all community-based programs and at all levels of post- levels about co-ops, conducting academic research, secondary education. In New York City, the City University of and performing research and development functions New York School of Law trains lawyers in cooperative law and is a host site for the upcoming Mondragon MBA. In Cincinnati, for the cooperative community. Mondragon, for Cincinnati State Technical and Community College has a example, began with a technical school and has its course that gives students hands-on experience with a local own university with a robust R&D arm. worker co-op. In the Bay Area and Western North Carolina, community colleges are beginning to engage. And in Madison, Current state: Generally speaking, the U.S. the University of Wisconsin Center for Cooperatives provides cooperative movement does not have strong ties education for co-ops and the general public, as well as an to educational institutions. In the Upper Midwest, undergraduate course on cooperatives. The Center is playing a leading role in working with the city and labor and other groups cooperative summer camps for young people to shape the city’s cooperative funding initiative. continue to build some foundational
In other parts of the world where worker co-ops thrive in much larger numbers, educational institutions are an active part of the cooperative ecosystem.
25 STAGES OF ECOSYSTEM DEVELOPMENT
Developing a Cooperative Growth Ecosystem is a long-term, iterative undertaking. While Ecosystem Elements do not fall into place in a set sequence, we envision the process of purposeful ecosystem development progressing through common stages. Drawing on change management and systems innovation theory,20 we envision multiple stages of ecosystem development, which may evolve sequentially or simultaneously.
BEGIN: Identify the change you seek and learn from others. incorporate these expectations into the early stage work, Identify the impact goal: Why start worker cooperatives? from fundraising to project planning. Evaluate and learn Is it to provide quality jobs, to retain closing businesses, from the pilot. to meet the immediate needs of contingent workers, to Building Essential Elements will be critical to the success change an industry, to reduce inequality? Connect with of the Create stage, which may actually begin alongside, coop developers locally and in the field more broadly to or even precede, the Convene stage, as a proof-of- understand the history and successes of their efforts. concept undertaking. Knowing both their own end goals and what others have learned will help early stage actors define their unique CONSOLIDATE: Build momentum toward a tipping point. value and role in the ecosystem. Build on early success and lessons learned to take growth to the next stage. Reassess the changing CONVENE: Develop a “guiding coalition,” analyze the ecosystem to identify potential catalysts for next-stage ecosystem, and create a strategic vision. work. Bring in new actors and mobilize more resources Understand the ecosystem: identify gaps, strengths for worker cooperative development aimed at scale. and opportunities, and the potential roles of the Using strong Important and Environmental Elements to various interested early stage actors. Learn from other create more robust Essential Elements is crucial in the regions about what they have done to support effective Consolidate stage. cooperative development and how they have built their ecosystems. Identify what local actors can do now to SUSTAIN: Anchor new approaches to create a “new build an ecosystem that supports a successful pilot mainstream.” project. This stage is where worker cooperatives, co-op Important and Environmental Elements may be the developers, capital providers and advocacy partners most operative at this stage, but any set of actors and are actively evolving the ecosystem that co-ops need elements can lead during these early stages. to thrive and grow. With adequate systemic supports, entrepreneurs are forming worker cooperatives as CREATE: Pilot successful practices and create short- a matter of course and cooperative developers are term wins. executing development projects in close partnership with Prove the concept: using the ecosystem analysis, identify capital providers. a proof of concept cooperative development project to In a mature ecosystem, all elements need to be working undertake that draws on best practices in the field of together at a systems level, and a wide range of actors worker cooperative development. Adequately resource must collaborate effectively over time. It is at the and support this pilot project and leverage the strengths Consolidate and Sustain stages that conditions for scale of the early stage actors to fill gaps and build capacity develop. for scale. Expect some difficulties, even failures, and
26 Regional Stories: “Reshoring” Textile Manufacturing and Opportunity Threads, Morganton, North Carolina
"The textile industry has such deep roots here [in spite of having from a starting group of three founders in 2009 to more largely moved offshore between 1995 and 2010, taking 120,000 than twenty workers in 2015. The factory’s 2015 reve- jobs with it]. This is [also] where the National Guard was called in nues were more than $700,000, and the company hopes to quell labor unrest [during the textile mill strikes of the 1920s]. to hit the $1 million milestone in 2016. Worker-owners If we can look back 30 years from now, and see that most of the now earn $16 per hour, including profit sharing, com- companies—whether they’re making fabric or they’re dye houses pared to $8 per hour at many other plants. They have or whatever they are—are owned by the workers themselves, I paid time off and own a productive asset that shows no think that would be an incredible shift of…consciousness in an industry. We’re starting to see this transformation.”1 signs of slowing its growth. The co-op has a unique partnership with Self Help In Morganton, North Carolina, a new model of place- Credit Union, which helped members set up savings based economic development has been unfolding over accounts and establish a special company account that the last decade, led by an innovative textile factory worker-owners can borrow against to build credit and owned by its employees. Opportunity Threads does cut- secure mortgages. and-sew textile work, producing garments, bags, pet Opportunity Threads is also leading a place-based accessories, and hundreds of “upcycled” T-shirt blankets supply chain effort to create good jobs in the textile each week. The company is a worker cooperative: The industry across the Carolinas, through its work with the people who work in the factory own it, make all the busi- Carolina Textile District (“the District”). The District’s aim ness decisions, and take home the profits. The workforce is to transform an industry—and a place—by support- is mostly Mayan indigenous immigrants from Guatemala, ing the growth of textile manufacturing enterprises and many with limited formal education and all with a high helping entrepreneurs connect successfully to each link degree of skills and experience in textiles. in the supply chain. Opportunity Threads and the District With support from the local community organizing are also supporting the sustainability of long-standing group, startup funding from values-aligned funders, businesses in the industry by encouraging them to con- loans from a community-based loan fund, a dedicated sider worker ownership as an option in their succession and visionary entrepreneur, a skilled workforce geared planning. toward cooperation, and the help of local technical 1. http://community-wealth.org/content/how-worker-cooperative-factory-help- assistance providers, Opportunity Threads has grown ing-bring-textile-manufacturing-back-north-carolina
27 A Look at 3
Following is an initial “ecosystem Five Cooperative analysis” of five places across the country: the San Francisco Bay Growth Area, New York City, Cincinnati, Madison, Wisconsin, and Western North Carolina. We chose these Ecosystems: regions because their individual successes, their potential, and Regional Examples the differences among them illustrate diverse approaches to the development of both worker cooperatives and Cooperative Growth Ecosystems. Each region has seen years, even decades, of cooperative development activity, and all are seeking new ways to develop their local ecosystems to increase impact and scale. Each regional snapshot identifies strengths and opportunities in the local ecosystem and suggests a possible path forward, along with numerous questions that local actors may want to explore as they develop local strategies and action plans.
MADISON
NEW YORK CITY SAN CINNCINATI FRANCISCO BAY AREA
WESTERN NORTH CAROLINA
28 San Francisco Bay Area
Long-standing Worker Co-op Community in a Thriving Multi-City Region The San Francisco Bay Area is a nine-county region comprising dozens of cities of all sizes, resource levels, governance models, and economic drivers. In the midst of a tech industry boom, the Bay Area has high inequality and is undergoing intense gentrification, with displacement reaching crisis levels as low-wage workers and people of color move out to far-flung suburbs. The area is also home to a large progressive community, diverse nonprofit and social enterprise sectors, and many values-driven capital providers.
The Bay Area has the most worker cooperatives of any metropolitan area in the United States, and many are several decades old. Almost one-third of the largest worker co-ops (with more than 50 employees) in the country are here. The tight-knit co-op community has substantial capital assets and an experienced workforce that shares best practices. More than one-third of these businesses are in retail, enhancing co-ops’ public profile, and a similar percent are in the food industry, providing ample opportunity to do business with each other. Some of the older co-ops have spun off new cooperatives, providing technical assistance and financing. There are also several pioneering worker co-op developers, a local network of worker co-ops, and a healthy appetite for innovation and scale.
4,594,060 Population*
23.72/hr * Median Wage 53.2% White** 24.1% Asian 9% Latino 8.3% 7.9% Black Unemployment**
Leading 98,421 Industries Total Business • Professional & † Establishments Technical Services • Food Services 85.6% • Adminitrative & Small Business Support
56 885 Oakland City Councilmember Annie Campbell- Worker Employees in Washington advances a resolution in support of Cooperatives Worker Cooperatives worker cooperatives, with the Bay Area advocacy group in attendance. † *2014 **2013 2011 Photo c/o Sustainable Economies Law Center 29 ECOSYSTEM ANALYSIS
Ecosystem Analysis: The Bay Area ecosystem has development, possibly in a staged city-by-city a solid foundation of Essential Elements, and its approach Environmental Elements are favorable for worker ▶ Build on recent local market assessments to cooperatives. The greatest opportunities for scale develop Connection to Market strategies may be with the Important Elements, which are in nascent stages of development. Possible System Interventions: Collaborative action Strong Elements in this ecosystem: may be the key to taking this Cooperative Growth Ecosystem to scale. How can Bay Area cooperative ▶ Member Skills and Capacity of longstanding worker co-ops and experienced Co-op Developers developers leverage the expertise and capital of Knowledgeable and accessible Technical their thriving worker cooperative community to Assistance providers support advocacy, policy initiatives, and connection- to-market strategies? How can local foundations, ▶ Values-Driven Businesses, including 56 worker co- ops and many Certified B Corps, green businesses, impact investors, and anchor institutions help and ESOPs growth-oriented worker co-op developers succeed? Perhaps the housing crisis and accelerating ▶ Local Attitudes and Culture supportive of social innovation gentrification present an opportunity to make a case for shared ownership as a path to community Opportunities to build and leverage strengths in this stability. Is there an opportunity for a city-by-city ecosystem: policy approach or are there regional agencies or Form Advocacy Partnerships with values-driven ▶ consortia that could be allies? business groups and social movements ▶ Promote Policy initiatives to build legitimacy, incentives, and funding for worker co-op
30 New York City
Worker Cooperatives Lead with Policy in the Largest City in the Country New York City is the largest and most complex city in the United States, and its economy is marked by extremely high inequality. With more than 325,000 employees and annual purchasing in the billions, the city government is a major player in the local economy and has a highly centralized “strong” mayor-council system. In 2014, New Yorkers elected a staunchly progressive mayor who publicly committed early in his term to worker cooperatives as a strategy to address inequality. The City Council allocated $1.2M in discretionary funding for worker co-op development in 2014, and in 2015 the allocation increased to $2.1M. This infusion of funds has resulted in a flurry of activity by a loose coalition of co-op developers and support organizations to promote, start, and convert existing businesses to worker cooperatives.
The South Bronx is home to the country’s largest worker cooperative, Cooperative Home Care Associates (founded 1985), with 2,200 workers, almost all women of color, doing home health care work. The rest of New York City’s worker co-ops are very new and small- scale—grassroots cooperatives initiated by workers themselves. The nascent coalition formed around city funding is still formulating its strategy and membership.
19,746,227 Population*
23/hr * Median Wage 44.3% White** 28.7% Latino 24.9% Black 9.8% 13% Asian Unemployment**
Leading 191,869 Industries Total Business • Professional & † Establishments Technical Services • Food Services 90.4% • Securities/ ‡ Small Business Investments
28 2,375 Jennifer Jones Austin and Wayne Ho, Federation of Protestant Worker Employees in Welfare Agencies, flank Councilmember Helen Rosenthal. Cooperatives Worker Cooperatives (one very large w/2,200 employees) Elected officials and NYC advocacy group championed worker cooperatives at the annual advocacy day at City Council. † ‡ *2014 **2013 2009 MSA Photo c/o FPWA 31 ECOSYSTEM ANALYSIS
Riding the wave of advocacy and city support, New ▶ Make Cooperative Education and Business Sup- York City’s ecosystem contains Important Elements ports available through educational institutions, for scale. The Essential Elements, however, are still community programs, and city agencies emerging and too reliant on city funding to be im- mune to the next election cycle. Possible System Interventions: Strengthening the Essential Elements of this ecosystem is the key to Strong Elements in this ecosystem: scale here. There is an opportunity to use current ▶ Policy strength and relationships with government city funding to build skills and capacity within worker officials forged in the collaborative work around city co-ops, and to access business supports and funding education to build the capacity of co-op developers ▶ Advocacy Partnerships, formed by the NYC worker to drive business success, quality job creation, and cooperative coalition, that are expanding to new co-op growth within the low-income communities social movement actors and the small business where they are already operating. How can the community relatively new coalition of worker cooperatives and co-op developers set standards and build Opportunities to build and leverage strengths in this capacity for worker cooperative development ecosystem: that aggregates resources for scale? How can ▶ Build Member Skills and Capacity within worker today’s city government support be leveraged to co-ops, especially the 50% that were formed in the institutionalize the city’s priority of worker ownership past ten years more broadly—in city procurement, city agencies, ▶ Increase the quantity and diversity of patient capi- and small business support services? tal available as Financing to NYC worker coopera- tives and to Co-op Developers
32 Cincinnati
Community Connections to Labor and Faith in a Medium-Sized City Cincinnati is a medium-sized city in the Ohio River Valley. It has a large working-class population and a long labor tradition as the first industrialized city in the Midwest. Inequality here is medium, and what used to be above-average unemployment partially as a result of deindustrialization across the Rust Belt has decreased in recent years. Several major corporations have their head offices in Cincinnati. The two largest employers are Kroger Corporation and the University of Cincinnati.
Cincinnati is in the early stages of developing a growth-oriented worker cooperative ecosystem. A robust network of faith-based organizations has long supported worker co-op development at a small scale, with a Catholic university recently playing a larger role. The relatively new Cincinnati Union Cooperative Initiative makes Cincinnati the central testing ground for the union co-op model developed by the United Steel Workers and Mondragon. Driven by two local nonprofit developers with distinct approaches and networks, worker co-op development is beginning to engage local politics and philanthropy in a vision of alternative economic development for the city.
2,149,449 Population*
17.23/h r * Median Wage 83% White** 12% Black 2.8% Latino 12.2 % 2.1% Asian Unemployment***
Leading 34,768 Industries Total Business • Food Services † Establishments • Professional & Technical Services 80.0% • Hospitals Small Business
Michael Peck, Kristen Barker, Ellen Vera, Flequer 4 50 Vera, and Phil Amadon (outside of frame), Worker Employees in organizers of Cincinnati Union Coop Initiative. Cooperatives Worker Cooperatives CUCI is developing unionized worker coops in partnership with organized labor. † *2014 **2013 ***2013 (city only) 2011 Photo c/o CUCI 33 ECOSYSTEM ANALYSIS
The relatively young worker cooperative ecosystem Opportunities to build and leverage strengths in this in Cincinnati has powerful building blocks in its ecosystem: relationships with labor and faith communities, and ▶ Develop co-op Member Skills and Capacity, these Important Elements have real potential to be including the skills of managers leveraged for scale. However, without a strong history ▶ Connect worker co-ops to mainstream Business of do-it-yourself cooperatives—and the social capital, Supports management expertise, business relationships, ▶ Strengthen Cooperative Education through local and TA providers that grow up around such a educational institutions and entrepreneurship programs community—Cincinnati is missing some Essential Elements that are preconditions to scale. Possible System Interventions: Fully leveraging the resources of existing partners may be the next step Strong Elements in this ecosystem: toward scale for this Cooperative Growth Ecosystem. ▶ Robust Advocacy Partnerships with labor and faith How can organized labor, for example, use its financial communities and legal resources and industry knowledge to build ▶ Potential for Connection to Market via these capacity in the worker cooperative community? How constituencies might the faith community leverage its connection ▶ Attitudes and Culture of support, while not to educational institutions to build skills and capacity widespread, are concentrated in key communities among co-op members? What other actors in the with power and resources ecosystem could help fill in gaps? Might a coordinated campaign help unlock public and private funding and engage the values-based business community?
34 Madison
Supportive Mayor in a Small City in the Heart of Cooperative Country Madison, the capitol of Wisconsin and home of its flagship university, has a solid middle class, a stable economy with low inequality, and relatively little racial diversity. The state of Wisconsin is distinguished by a long history of cooperative organizing and a strong cooperative economy, based in agriculture but present across sectors. A polarized dynamic between progressive Madison and conservative state government has made the statehouse a flashpoint for mass protest. Madison’s progressive mayor has a history of supporting co-ops and, in 2014, committed $5M over five years from the city’s capital budget for cooperative development. In 2015, a worker co-op leader was elected to Madison’s Common Council.
Madison has the highest rate in the country of employment per capita in worker cooperatives. More than 500 people working in 14 worker co-ops compose between 0.3% and 0.4% of Mad- ison’s total labor force. These co-ops have a public profile and level of political influence that is not seen elsewhere in this country. With more than 80 cooperatives of all types in this small city, the cooperative way of doing business is widely seen as “normal” in Madison, and co-ops enjoy institutional support from higher education and business service providers. The two largest worker co-ops in Madison were both formed through conversion from a conventional form of ownership.
633,787 Population*
18.52/h r * Median Wage 87.1% White ** 5.5% Latino 4.4% Black 5.3% 4.3% Asian Unemployment***
Leading 12,686 Industries Total Business • Food Services † Establishments • Professional & Technical Services 77.9% • Administrative & Small Business Support Services
14 500 The City of Madison's Mayor Soglin Worker Employees in committed $5 million over the next 5 years Cooperatives Worker Cooperatives to support cooperative development.
*2014 **2013 ***2013 (city only) † 2011 35 ECOSYSTEM ANALYSIS
Ecosystem Analysis: A clear picture emerges in of Co-op Developers to carry it out Madison of a mature and well-supported ecosystem ▶ Explore Connection to Market and contracts with for worker cooperatives, with Essential, Important, anchor institutions as a strategy for scale and Environmental Elements in place, alongside a ▶ Develop the Financing ecosystem for worker co-ops nascent ecosystem for low- and moderate-income beyond the strong foundation of self-financed growth worker cooperative development aimed at scale. Possible System Interventions: With an already Strong Elements in this ecosystem: strong Cooperative Growth Ecosystem, Madison has ▶ Member Skills and Capacity in long-standing an opportunity to aggregate the resources, reach, worker cooperatives and expertise of its current worker cooperatives and ▶ Experienced Technical Assistance providers co-op developers to bring in new worker-owners from ▶ Values-Driven Businesses, including co-ops of all low-income communities and communities of color. kinds Could some portion of the mayor’s capital budget ▶ Advocacy Partnerships with labor, higher educa- support “high-risk” forgivable pre-development loans tion, and co-op lobbying groups at the local and to support this expansion? How could high cooperative state levels awareness and the fact that the two largest worker co- ▶ Widespread Attitudes and Culture favoring co-ops ops in the city were created through conversion jump- start a drive for cooperative conversions in Madison Opportunities to build and leverage strengths in this as a business succession and community economic ecosystem: development strategy? What additional outreach and ▶ Develop a city-wide strategy for incubation of work- supports may be needed to bring the worker co-op er co-ops for low-wage workers and build capacity model to Madison’s low-wage workers? 36 Western North Carolina
A Place-Based Rural Industry Focus Western North Carolina, also known as the Mountain Region, is the rural part of the state that includes the Appalachian Mountains. Its main population center, Asheville, has a population of 83,393, while the entire region has nearly 1.5 million people. Asheville has a high rate of income inequality. The geography of North Carolina reinforces strong regional patterns of identity and culture, economic development, and industry concentrations. Western North Carolina is home to a large number of immigrants of Mayan descent, many of whom work in the poultry, furniture, and textile industries. The textile industry has historically been a critical part of the region’s economy, and offshoring has resulted in a massive loss of textile jobs since the 1980s.
Recent interest in reviving the textile industry is driving new efforts in cooperative develop- ment. One highly innovative and fast-growing worker-owned textile factory co-founded, and plays a leading role in, the Carolina Textile District, a collaboration of businesses along the textile industry value chain. Overall, Western North Carolina has only four worker coopera- tives, but a recently-formed cooperative development center and value-chain organizing within the heritage industries (especially textiles, hosiery, and furniture-making) could spur more strategic co-op development as part of broader economic revitalization. As in many rural areas, the only prospective buyers for businesses whose owners are retiring may be local, increasing potential for conversions to cooperative ownership.
1,483,345 Population*
14.55/hr * Median Wage 89.9% White ** 6% Black 5.9% Latino 7.4% 1.4% Asian Unemployment***
Leading 9,831 Industries Total Business • Food Services † Establishments • Ambulatory Health Services 84 % • Administrative & Small Business Support Services
4 45 Jessica Medina and Reyna Rodriguez, worker-owners, Opportunity Worker Employees in Threads. The Carolina Textile District is "reshoring" North Carolina's textile Cooperatives Worker Cooperatives production, through a place-based rural economic development strategy centered on worker-ownership of heritage industries. † *2014 **2013 ***2014 (Asheville MSA only) 2011 (Asheville MSA only) Photo c/o Opportunity Threads 37 ECOSYSTEM ANALYSIS
This Cooperative Growth Ecosystem has key Essen- ▶ Build off success in the textile industry to develop tial, Important, and Environmental Elements along Connection to Market strategies in other industries the value chain of one key heritage industry (textiles), ▶ Develop Advocacy Partnerships to explore and providing an inspiring example for other industries potentially advocate for Policy to incentivize worker and regions around the state and the country. Worker co-op development co-ops and developers are just beginning to expand this ecosystem to other local industries. Possible System Interventions: One key opportunity for scale in this ecosystem is to shore up and expand Strong Elements in this ecosystem: the pioneering textile industry–specific efforts for ▶ Technical Assistance made available through a further job creation, especially through conversions of young co-op development center existing businesses to worker co-ops. What would it ▶ Supportive Attitudes and Culture, including a take for conversions of existing textile manufacturing tradition of self-help in the region and widespread enterprises to go to scale as a strategy for saving interest in worker co-ops in Asheville and improving manufacturing jobs in the region? To ▶ Strong Business Supports in the textile industry replicate such an effort in other heritage industries? Is policy important at this juncture or would a pure Opportunities to build and leverage strengths in this technical assistance–focused industry/value-chain ecosystem: strategy be most productive? More broadly, how can ▶ Increase number and capacity of Co-op Develop- the supportive community in the region’s largest ers that can focus on startups and conversions of city, Asheville, be leveraged to strengthen support existing businesses, possibly by leveraging Coop- for co-ops via existing entrepreneurial and small erative Education at entrepreneurship programs business programs? and local colleges
38 Findings
The five cities we studied teach us that there is no single way to coalesce a Cooperative Growth Ecosystem. We initially suspected that the Essential Elements of the ecosystem would be the starting place. Indeed, regions like the Bay Area and Madison first developed their worker cooperative presence—the beginnings of their ecosystems—through decades of independent efforts by worker-owners and co-op developers. In many communities, however, it is the Environmental and Important Elements such as advocacy partnerships and community awareness that are the initial catalysts for ecosystem growth.
Regardless of which actors or elements initially drive activities within the ecosystem, it is the Essential Elements that build worker cooperatives. In nascent ecosystems, Essential Elements must be built from scratch, and even in the more developed ecosystems, there are still notable gaps, for example, in philanthropic and investment capital or in co-op development capacity in low-income communities. For a Cooperative Growth Ecosystem to mature and have a significant impact on its community,Important Elements such as advocacy partnerships, supportive policy, and connections to market are likely needed to fully resource the Essential Elements and unlock scale.
Comparing our two largest regions, the San Francisco Bay Area and New York City, sheds light on how ecosystem elements and stages of development can play out. These two dynamic ecosystems have very different strengths and gaps that suggest different courses of action for developing their Cooperative Growth Ecosystems.
BAY AREA: The long-standing Bay Area worker cooperative community has many Essential Elements in place: there are several large worker cooperatives; strong skills
39 and skill-sharing among worker-owners; almost two decades of pioneering practices in growth-oriented co-op development; even appropriate capital and technical assistance supports to access it. But until very recently there has been a notable lack of advocacy partnerships and policy initiatives, little strategy supporting connection to market, and few mainstream business supports integrating worker cooperatives. Local actors are just entering the Convene stage. Rich in Essential Elements, and underdeveloped in Important Elements, this ecosystem has a great deal of internal strength, but is not growing or scaling as quickly as it could. To realize their shared community economic development goals and help reduce the region’s rapidly growing inequality, Bay Area actors will need to further strengthen Essential Elements and collaborate effectively to galvanize more resources and strategic partnerships to develop Important Elements of the ecosystem that can support scale.
NEW YORK: The relatively young New York City worker cooperative community has won substantial funding and policy supports through robust advocacy partnerships, and it is aiming to institutionalize worker cooperatives in the business support ecosystem and build connections to market through city procurement. Having Convened a strong coalition, local actors now have a mandate to Create sustainable, scale-oriented co- ops and co-op development initiatives. But the Essential Elements are nascent and building: member entrepreneurial leadership is just beginning to develop in a wave of young cooperatives, and there is very little equity investment to match philanthropic support. Most critically, a large pool of very new cooperative developers needs to build entrepreneurial leadership skills and experience, especially considering that the majority of worker cooperative development efforts here aim to support cooperative business ownership among low-wage workers, recent immigrants, and other groups locked out of ownership opportunities. Rich in Important Elements and underdeveloped in Essential Elements, this fast-growing but fragile ecosystem struggles to develop capacity in cooperative development and management to meet the demand it is mobilizing.
Lessons About Scale
Keeping our focus on impact and scale, we also examined how various ecosystem elements support different kinds of scale, and found that different elements play key roles.
Size of individual enterprise Key ecosystem elements: Growth capital, management Worker co-ops can thrive at all sizes, but larger cooperative enterprises not only create more quality jobs (often doing so more efficiently as they create economies of scale) but also play a critical anchoring, resource- sharing, and influencing role within a thriving Cooperative Growth Ecosystem. In the Bay Area and Madison, for example, large local co-ops have provided key support within their local ecosystems. Building larger worker
40 Susana Peralta, worker-owner, Beyond Care Cooperative. Beyond Care, which is supported by Center for Family Life, is part of the Coops United of Sunset Park (CUSP). Photo c/o Myleen Hollero
co-ops requires skilled management both within co-ops and among co-op developers, as well as growth capital, as distinct from startup capital. Once a cooperative business makes it past the startup stage, whether this was self-funded or grant-funded, its ability and willingness to grow larger appears to correlate directly to the availability of skilled management, appropriate technical assistance, and appropriate growth capital. Without the leadership that drives and manages growth, the business will not be ready to accept equity investment or debt. Appropriate growth capital—and the technical assistance, entrepreneurial leadership and skilled management required to access that capital—is key to driving growth in the size of individual enterprises.
Density of co-ops in a region Key ecosystem elements: Member entrepreneurial leadership, TA providers, policy, co-op developers Density of worker cooperatives in a given place has a powerful multiplier effect, generating and mobilizing resources that support further growth in number of enterprises. In the more mature ecosystems we studied, existing worker cooperatives and cooperative developers leveraged their skills and capacity in a variety of ways to increase the number and density of worker cooperative businesses: Co-ops trained common TA providers; pooled capital; cross-pollinated personnel and management talent; joined forces in policy advocacy to galvanize resources for co-op development; and provided a range of direct technical assistance to other cooperatives, including some worker-owners becoming full-time co-op developers. In Madison, especially, the presence of 500 worker-owners in fourteen worker co-ops, and 80 total cooperatives in a small city has normalized the model. This suggests that one way to build a flourishing Cooperative Growth Ecosystem may be simply to start as many worker cooperatives as
41 possible and then leverage their strengths for further growth. Worker cooperatives themselves— along with co-op developers, policy, advocacy partnerships, technical assistance providers, and business supports—are the drivers for increasing the number and density of worker cooperative businesses. This density of worker cooperatives then becomes its own fuel for growth.22
Impact on community Key ecosystem elements: Growth-oriented cooperative developers, grant funding, equity investment, advocacy partnerships The impact of worker cooperatives—their ability to build wealth and create quality jobs for low-wage workers and to influence other parts of the system from industry practices to local economy and policy—is where we begin to see their potential as a vehicle to reduce inequality. The entrepreneurial leadership of cooperative developers plays a central role in worker cooperatives’ positive impact on low-wage workers and communities of color. In the Bay Area and New York City, for example, cooperative development organizations are driving efforts to use worker cooperatives as a strategy to create jobs and build community wealth. Often they incubate, coach or help manage co-ops through critical startup, expansion and business ownership transition periods. They also work to build these capacities, to varying degrees, among the worker-owners. Where cooperative developers have more resources and strong ability to develop businesses and develop people, more cooperatives are being developed with greater impact for unemployed and underemployed people, low-wage workers, and recent immigrants. Conversely, in places where few or no such cooperative development organizations exist, or where developers utilize only “low- touch” approaches, the model’s impact as a community economic development strategy is limited.
Business and participatory management skills are critical to all three components of scale: to increasing the size of individual enterprises, to helping more worker co-ops start and succeed, and to increasing impact for low-wage workers. These skills are perhaps most necessary for cooperatives aiming to create quality jobs and shared business ownership for low-wage worker- owners. With a great deal of interest in worker cooperatives coming from people otherwise locked out of good jobs and wealth-building opportunities, relying on a do-it-yourself startup model alone will not achieve the true promise of worker cooperatives for those who need them most. Yet, many of the organizations getting involved in cooperative development are community organizing and social service organizations that have little experience operating businesses in the market. This new growth is extraordinarily vulnerable if not met with adequate resources and appropriate skills.
Business and participatory management skills are critical to all three components of scale.
42 Regional Stories: Twenty Years of Cooperative Growth in the San Francisco Bay Area
San Francisco Bay Area, 1995: Worker cooperatives—most started in the technology sector, green construction, and food of them formed in the 1970s and early 1980s—are thriving. retail. A couple of major cooperatives of the 1990s have either The cooperatives, concentrated in natural foods and media/ closed or demutualized. cultural production, are distinctly countercultural: alternative, Today, there is strategic momentum toward developing left-leaning, utopian. In this tight-knit community, worker cooperative businesses with low-wage workers of color. WAGES co-ops informally lend to each other, workers move between (now Prospera) pioneered a model for worker cooperatives in cooperatives for jobs, and a worker co-op business network the green housecleaning industry that has inspired dozens of recently formed. Growth is modest, organic and largely self- adaptations around the country. Four cooperatives developed by financed. A study group, including a worker-owner and technical WAGES support almost 100 worker-owners and generate around assistance providers, aims to understand and replicate the $4 million in annual revenue, and substantial increases in pay Mondragon cooperative model in the Bay Area. A nonprofit and benefits. Other community economic development efforts organization has just formed to empower low-income women include worker-owned Mandela Foods Cooperative in West Oak- using the cooperative model. land, a nascent co-op incubator and loan fund in Richmond, and San Francisco Bay Area, 2015: What a difference twenty years the Project Equity Business Incubator (co-founded by a former makes. The 1995 study group formed the Arizmendi Association director of WAGES and an experienced social entrepreneur), of Cooperatives, a self-financed cooperative development and which helps businesses convert to worker cooperatives. support organization structured as a secondary cooperative. Its The infrastructure of support has also grown. The Sustainable six member cooperatives now employ more than 120 people, Economies Law Center and the Green Collar Communities Clinic, have combined revenues of around $18 million annually, and with attorneys mentored by existing co-op lawyers, play an active are well-known local fixtures. They borrow from a local CDFI role advising startup cooperatives. Cutting Edge Capital pio- and have even received tax breaks from cities eager to anchor neered the Direct Public Offering, used by cooperatives around new development. The new nonprofit became WAGES (Women’s the country to raise community capital. The Democracy at Work Action to Gain Economic Prosperity, later re-branded as Institute and the National Center for Employee Ownership, both Prospera), the groundbreaking developer of cooperatives led by in Oakland, are actively collaborating to advance a spectrum of Latina immigrant women (see below). These two industry-based democratic employee ownership options and supports. A nascent initiatives demonstrate the power of concentrating effort and coalition has formed around advocacy work; it helped pass a resources along industry lines. California legal form specifically for worker cooperatives and a Existing worker cooperatives have grown. Two of the country’s resolution of support by Oakland’s City Council. largest worker cooperatives—Rainbow Grocery and Alvarado The next challenge is to engage with larger-scale Bay Area Street Bakery, both started in the 1970s—are in the Bay Area, economic drivers, such as the booming tech economy, which is with combined total revenues of over $100 million and more fueling a small business and housing displacement crisis, and than 350 worker-owners. Other long-standing cooperatives have retiring business owners, to prevent a wave of small business spun off new businesses, providing technical assistance, capital closures. To succeed at scale, worker ownership needs to be in- and market access; most notable is the Cheese Board’s support tegrated into the economic development agenda and prosperity for the Arizmendi Association. Wholly new worker co-ops have planning for Bay Area cities.
43 The 4
Here we tell the story of a fictitious Growth of an Any Town where a variety of stake- holders use the Cooperative Growth Ecosystem framework to analyze Ecosystem in their local community and develop an ecosystem of support for worker Any Town, USA cooperatives. Over fifteen years, they move through the Convene, Create and Consolidate stages of ecosystem development and generate good jobs in worker co- operatives for hundreds of community members. Any Town, USA
Any Town is a midsize city in the middle of the country. A group of visionaries have come together, inspired by the success of worker cooperatives in other cities where anchor institutions and city gov- ernment have embraced their development. There are no worker co-ops in Any Town, but there are some credit unions, one food co-op, and a thriving social enterprise community.
In two years of infrequent conversations, these visionaries have brought together diverse stakehold- ers spanning labor, economic development, anchor institutions, and the local community foundation. The group decides to use the Cooperative Growth Ecosystem framework to determine where they can have the greatest impact in jump-starting a cooperative economy in Any Town.
ECOSYSTEM ANALYSIS
The group convenes a half-day workshop for twenty ▶ How strong are our Essential Elements? participants representing the four most active orga- ▶ What can we identify as a “game changer” for our nizations and some allies from the social enterprise ecosystem? community and the food co-op. Together they fill in ▶ What does this tell us about where we might want the scorecard displayed here, rating each element on to start? a scale of 0-5 (five being most developed). Then they step back to reflect on these key questions: Their key observations are the following: ▶ What are the strongest elements in our ecosystem? ▶ With no worker co-ops, no co-op development ▶ Where are there notable gaps? organizations, and no previous experience of ▶ Which categories do our weak and strong elements investing in worker co-ops, Any Town scored fall in? low on the Essential Elements of a Cooperative
44 Growth Ecosystem. The nascent group leading this storage. The one anchor institution in the group—a initiative, however, includes the local community hospital—is interested in being creative about how foundation and an attorney who is connected to its procurement of goods and services might be the business community and has moved from able to support the growth of worker co-ops. curious to passionate about worker cooperatives. ▶ Any Town’s moderately high score in Environmen- ▶ The group is optimistic about being able to devel- tal Elements makes the group optimistic about op the Important Elements of the ecosystem. The the community’s receptiveness to cooperative main participants have strong connections to the businesses. They hope to leverage the strength of local Small Business Development Corporation the local social enterprise sector and the backing (SBDC) and other business support entities within of food co-op leaders to support implementation city government and local nonprofits. They also of their early strategies. The local university has a identified three key industries that are growing in professor who teaches about cooperatives in her Any Town and in which worker co-ops might have a undergraduate business course, so co-ops are not good chance at success: small scale food manu- an entirely foreign idea. facturing, home health care, and medical records
ACTION PLANNING
Based on these observations, the Any Town group considered three paths forward:
OPTION 1: Community planning approach: Expand the circle of anchor institutions and govern- ment officials (especially in the city’s economic development department) who can get behind a cooperative development strategy and initiate a research and planning process to determine the best strategy.
Analysis: With initial support from anchor institutions, some supportive city officials and a growing medical records storage industry, this option seems promising on the surface. The group looks into it and finds the following: ▶ Anchor purchasing comprises millions of dollars in the local economy, and much of it is bound up in multi-year contracts with multinational corporations. Recently, however, the local public- ly-funded hospital came under mandate to increase community health outcomes to maintain its funding. ▶ The local community foundation is interested in the community planning approach, and in per- suading other funders to explore it. ▶ With no cooperative developers on the ground yet, it will take years to build the capacity to create businesses that can effectively serve anchor institutions. ▶ Anchor institution development projects in other regions have shown that there can be a mis- match between the limited capacity of startup businesses and the high-volume service needs of large anchor institutions. ▶ There may be some possibility in helping existing businesses that serve anchor institutions to convert to worker-ownership, rather than starting new anchor-serving businesses.
45 Any Town, USA, Ecosystem Scorecard
ECOSYSTEM ELEMENTS METRICS SCORE ESSENTIAL ELEMENTS Member Skills & Capacity Management expertise 0 Member skills 0 Growth-oriented leadership 0 Financing Availability/experience of loan capital 2 Availability/experience of investment capital (equity) 0 Availability/experience of grant capital 2 Availability/experience of community capital 0 Technical Assistance Supply, quality & affordability of professional service providers 1 Co-op Developers Co-op developers—experience, business acumen & scale orientation 0 Co-op networks/associations 0 IMPORTANT ELEMENTS Business Supports Mainstream business advisory services, incubators & industry peer networks 2 Public workforce & economic development programs—quality & accessibility 3 Connection to Market Anchor institutions & key clients 2 Supply chain 1 Key industries 3 Local government contracting & community benefit agreements 2 Policy Tax/business barriers/incentives 1.5 Government funding or support 1 Pro-cooperative laws/regulations 0 Advocacy Partnerships Government officials 2 Community/social movements & concerns 2 Advocacy by worker owners, co-op movement leaders & their partners 0 ENVIRONMENTAL ELEMENTS Values-Driven Businesses Strength of worker co-op sector 0 Backbone organization(s) 2 Other co-ops, B Corps, ESOPs, social enterprises & community land trusts 3 Attitudes & Culture Desire/momentum for change 3 Cooperative awareness 2 Cooperative Education Institutional education programs 2 Integration of coops into SBDCs 0
OPTION 2: Lean startup approach: Identify an organization that could develop a worker cooperative quickly and pool resources to create a successful demonstration project to showcase the cooperative model as part of the local economy.
Analysis: With a strong social enterprise community, this seems like a natural direction to pursue. Further investigation reveals the following opportunities and gaps: ▶ Local lenders and investors have little experience with worker cooperatives. However, due to strong cooperative ties, there may be an opportunity to secure some equity investments from the food coop and the credit union.
46 ▶ There is a local community foundation that may be interested in investing, but would need to be convinced of the potential community wealth-building impact for low-wage workers. ▶ A leading social enterprise organization has developed multiple social enterprises in home health care, one of the key growing local industries. One of these enterprises is mature enough to become a permanent stand-alone business—as a worker cooperative. ▶ A local community organizing group is partnering with a workers center to start a campaign targeting health care agencies and hospitals, to demand a living wage for non-union health care and home care workers.
OPTION 3: Conversions approach: Undertake an awareness-raising campaign targeted at local small-business owners in the food manufacturing sector, which is strong in Any Town.
Analysis: Investors, lenders, and funders are immediately interested in this idea, but the group is uncertain where to start. A few members learn more by reading case studies of worker coops formed through conversion, studying a successful conversions initiative in France, and conducting a few interviews with people involved with local food manufacturing and potential allies for this work. They conclude that: ▶ Several small factory owners are nearing retirement age, and the small business support com- munity is tight-knit and could help raise awareness of employee ownership among its retiring members. ▶ The supportive local attorney is willing to learn the details of structuring and financing coopera- tive ownership transitions, and to mentor other attorneys. ▶ A local Community Development Financial Institution (CDFI) is potentially interested in financing cooperative conversions, but needs to be persuaded by at least one successful example.
TAKING ACTION
After looking at the data, the group agrees to pursue Options 2 and 3, and to consider Op- tion 1 as a possible next-stage initiative. They take the following steps to launch the effort: ▶ The community foundation provides a grant that will be split between the social enter- prise organization that will “incubate” the home care co-op and an experienced co-op developer from another state that will provide technical assistance and cooperative expertise. Their goal is to convert the home care service run by the social enterprise organization into a stable and growing worker cooperative within a year, linking it to the social enterprise organization through a contract for back-office services. They may coordinate with the local workers’ center on hiring. ▶ The local attorney agrees to increase her legal knowledge of cooperatives by connect- ing to other co-op attorneys around the country and offering pro bono services to help form the home care cooperative. ▶ The group approaches a public relations firm to conduct an awareness campaign about succession planning and employee ownership targeted at manufacturing firms;
47 the campaign will be funded by a combination of pro bono time from the PR firm and a matching grant from a national foundation. ▶ To make some headway on the community planning approach, a small group, staffed by the social enterprise organization, will undertake research on local industries to understand their growth trends, capital needs, and potential to create quality jobs. At the end of the year, they will present this research to the full group to inform future projects. Given its interest in anchor institution strategies, the community foundation is considering a small grant to fund this research.
The local partners agree to meet quarterly over the next year to support and learn from the success of this initial effort. Their longer-term plans are to support the conversion of at least one successful food business into a worker cooperative in year 2 and to develop new co-ops along the initial cooperatives’ value chains. They will create a new co-op development organization within a year, and develop a five-year growth plan that connects philanthropic investment with equity investment. They will revisit anchor strategies at the end of the first year of work, to assess the feasibility of this approach.
Any Town started small, assessed what they had and what they needed, and moved quickly to a small-scale concrete learning project, from which they could launch larger and larger initiatives. They moved quickly from the Convening stage to the Creating stage of ecosystem development to demonstrate proof of concept. By taking stock early on of their local growth industries, technical assistance capacity, available grant funding and likely capital sources, they were able to develop two strategies simultaneously without jeopardizing the success of the demonstration project. Strategies and projects that seemed out of reach in the early years were ripe for implementation after years of practice. Ten years in, they moved into the Consolidate stage, engaging more and more actors and elements in the ecosystem to support greater size and density of cooperatives. By year fifteen, their Cooperative Growth Ecosystem was thriving.
Any Town started small, assessed what they had and what they needed, and moved quickly to a small- scale concrete learning project, from which they could launch larger and larger initiatives.
48 Any Town at Fifteen: Portrait of a Thriving Ecosystem
After several high-profile successes and a couple of cooperative business closures over 15 years, Any Town has built a Cooperative Growth Ecosystem benefitting hundreds of low- to moderate-in- come families around the city. The ecosystem builds on the relationships and strategies developed in the earliest stages of planning. In this mature ecosystem:
▶ Most of the city’s dozen or so worker cooperatives are concentrated in key industries but some have arisen spontaneously in other sectors of the economy. Some of these were startups and others converted from another form of ownership; many were created along the value chain or “spun off” from existing cooperatives. The co-ops are all visible in the community and active in local business associations. They have also created a local Co-op Network that meets quarterly for mutual learning and to plan joint promotions. ▶ Two co-op developers led the launch of six of these cooperatives and now have strong track records and steady funding through public and private grants, as well as earned income. One of these developers is a stand-alone nonprofit and the other is a large social enterprise organization with a co-op development division, staffed in part by former members of the first cooperatives it developed. ▶ The majority of the worker co-ops have more than twenty worker-owners, and three-quarters of them employ formerly low-wage workers. They have created internal training programs and external partnerships with entrepreneurship organizations, other co-ops, and community colleges to help worker-owners develop business and management skills and strategies for sustained growth. ▶ Several local lawyers and CPAs have expertise in co-op law and accounting, and the local law school provides free advice to startups through its community economic development legal clinic. The co-op community is also well connected to the business school and a variety of business support programs. ▶ City government and local Small Business Development Centers actively promote worker co-op development as a community economic development strategy and educate entrepreneurs about cooperative business models. ▶ The co-op community is connected to organizing and advocacy groups and supports their campaigns for better conditions for workers and their efforts to increase demand for worker cooperatives. ▶ Co-ops are regularly featured in the media and at the annual social enterprise conference, as well as in several courses at the university and community college.
49 Our six examples—five cities and regions around the country and the fictional Any Town USA—help illuminate 5 how Cooperative Growth Ecosystems develop and how using an ecosystem framework can strengthen the role of worker cooperatives in community eco- Recommendations nomic development. They offer insights about how to move an existing ecosys- tem toward maturity and how to jump- start a new ecosystem.
To help turn these insights into action, we offer some recommendations for three distinct audiences: actors in the five regions we studied, actors in any early-stage ecosystem (like Any Town USA), and co-op developers, the actors that make our Cooperative Growth Ecosystem unique. We then close with general recommendations for anyone interested in expanding the use of the worker cooperative mod- el to build community wealth and address inequality and other pressing issues of our time. Recommendations for the five regions
First and foremost, we encourage actors in existing ecosystems to coordinate their efforts strategically, using an ecosystem framework to develop their own insights and strategies. By collaborating to grow markets, access capital, advance policy and connect to allied communities, they will build conditions that support scale. For the five regions we studied, we developed some initial hypotheses about where the greatest potential might lie for next-stage growth that increases the impact of worker co-ops among low-wage workers and communities of color: ▶ The Bay Area’s potential could lie in collaborative action for policy change and resource mobilization, building on its Essential Elements to create Important Elements such as advocacy partnerships and connections to market; ▶ New York City’s priority could be for cooperative developers and technical assistance providers to work together to strategically to strengthen Essential Elements such as financing, technical assistance, and co-op development capacity; ▶ Cincinnati’s best path forward may be to fully leverage its Important Elements, the resources of existing labor and faith community partners, to build overall ecosystem strength; ▶ Madison’s biggest challenge may be to coordinate its very strong ecosystem—especially the entrepreneurial leadership in co-ops and the strong local technical assistance center—to increase capacity to bring in new worker-owners from low-income communities and communities of color; ▶ Western North Carolina could expand pioneering efforts in the textile industry for further job creation, especially through conversions of existing businesses to worker co-ops, bringing its somewhat developed Essential and Important Elements together to strengthen both.
50 Recommendations for early-stage ecosystems
Most places in the country are in the early stages of developing a Cooperative Growth Ecosystem, exploring or forming a cross-sector coalition of organizations and local leaders interested in using worker cooperatives to build community wealth. They may have gathered interested actors, identified their shared interest, and begun to stoke their enthusiasm for worker cooperative development. These enthusiastic actors want to know: what next? Where to start? How to invest?
To help identify next steps, we return to the stages of growth framework. ▶ BEGIN: Identify the change you seek and learn from others. ▶ CONVENE: Develop a “guiding coalition,” analyze the ecosystem, and create a strategic vision. ▶ CREATE: Pilot successful practices and create short-term wins. ▶ CONSOLIDATE: Build momentum toward a tipping point. ▶ SUSTAIN: Anchor new approaches to create a “new mainstream.”
We encourage early-stage ecosystem leaders to jump in and start cooperative businesses, but to do so in a way that mitigates risk and amplifies support through effective collaboration, smart experimentation and learning, and long-term strategic thinking. While staying thoughtful and collaborative, do not get stuck in the Convene stage. Take the critical step from Convening diverse actors and developing a shared vision to Creating a successful pilot project to generate a short-term win. Especially in areas where there are no worker co-ops or co-op developers that stand as an example of business success and community impact, building these early and well is critical. To choose a demonstration project, explore various strategic options through the lens of cost, time, impact, partnerships, and potential for scale. Is it an industry-specific model, an anchor institution strategy, or something else that will best fit your ecosystem? Is it startups or conversions? Where can you pilot a project that builds capacity and creates that early win?
We encourage practitioners to jump in and start cooperative businesses, but do so in a way that mitigates risk and amplifies support through effective collaboration, smart experimentation and learning, and long-term strategic thinking.
51 A WORD TO WORKER CO-OP DEVELOPERS
Understanding their work within an ecosystem can help co-op developers define their desired impact, role, and growth strategy and develop partnerships to ensure the success of the cooperative as a business that meets its members’ needs for quality jobs.
We encourage co-op developers to envision their work in the context of: ▶ A place, so they connect with ecosystem actors who can help their co-ops thrive by accessing customers, vendors, workers, and opportunities. ▶ An industry, so they set up management, purchasing, physical plant, marketing, and hiring practices geared to that industry. ▶ A capital ecosystem, so they begin building relationships with potential investors and lenders long before they need money. ▶ A community development and organizing ecosystem, so they connect authentically with communities whose needs are served by the co-op, and who share interests with worker-owners in building power for inclusive development.
In order to Create pioneering practices and to Consolidate the lessons and resources from the Create stage, diverse actors must support and complement the role of growth-oriented co-op developers by strengthening the Essential Elements of the ecosystem: member skills and capacity, appropriate capi- tal, cooperative-specific technical assistance, and the cooperative developers themselves. For example, ▶ Economic development and workforce development practitioners can collaborate with prospective cooperative developers to provide member training and small business supports and to develop market access opportunities. ▶ Social movement allies can work with other actors in the ecosystem to co-create campaigns for inclusive economic development that creates market opportunities for worker cooperatives. ▶ Local governments, capital providers and philanthropic funders can invest in supportive infrastructure such as business advisory services, and a variety of patient capital sources to support co-op development. ▶ Worker cooperatives can invest in their own entrepreneurial leadership and connect more broadly to allies, understanding that they play a critical direct role in building local ecosystems for scale. ▶ Educational institutions can take on multiple roles in an ecosystem—as research centers, anchor institutions, and key capacity-builders for cooperative development skills and expertise, particularly building management and entrepreneurial leadership capacity.
Understanding this early-stage work in a Cooperative Growth Ecosystem framework helps all actors keep the focus on the successful development of worker cooperative businesses. Cooperative developers are not struggling in isolation to launch one business or even five businesses, but are aiming
52 toward concrete wins—successful cooperatives—to build toward a longer-term tipping point— density of high-impact cooperatives within an ecosystem of support. One eye is always on the next stages: Consolidate gains and Sustain the model. The larger project team identifies opportunities for growth, and inflection points where ecosystem elements can be built; they are always consolidating resources and learnings to build more support infrastructure. General recommendations
A growing movement of diverse actors is shifting the economic development discussion toward fostering sustainability and reducing inequality. Worker cooperatives can accelerate this change by combining economic growth with community and worker well-being. Anyone who wishes to foster an ecosystem that supports the successful development of these unique businesses should take to heart the lessons of the past several decades of sus- tained growth in worker cooperatives: ▶ Don’t try to do it alone: Draw on the experience of existing worker co-ops, expe- rienced co-op developers (whether they be local or not), and national and regional leaders in the field to create early successes and long-term ecosystem-building strategies. Learn from others’ successes and mistakes, share learnings, and build a community of practice. ▶ Build Essential Ecosystem elements: Adequately fund growth-oriented co-op developers with business and human development expertise. Cultivate a diverse funding ecosystem willing to invest for several years at a time and not reliant on a single source. Pair this funding with impact-oriented investment capital that can support and sustain business growth. ▶ Collaborate strategically: Identify unique roles in the ecosystem, with each actor doing what they do best, and partner with others fulfilling their unique roles. Social movements play a role distinct from business developers, who play a role distinct from capital providers. Additionally, cooperative developers can collaborate for business advantages or funding. Collaborations for scale may create unlikely allies to move policy, mobilize resources, or open new markets. Seek and cultivate these alliances. ▶ Think “ecosystemically”: Ask “How is what I am doing contributing to the building of an ecosystem of support? If it is not, how could it be?” The first step to building a thriving Cooperative Growth Ecosystem is intending to. Doing so will not only amplify impact in the long term but make the work in the moment easier and dramatically increase chances of success.
53 Regional Stories: A Mature Cooperative Ecosystem in Emilia Romagna, Italy
In response to a devastated post-WWII economy, the All Cooperative Growth Ecosystem elements are in place in Emilia government of Emilia Romagna initiated a regional economic Romagna. Some highlights include: development strategy centered on cooperatives. The Emilian government started with policy, enshrining the “social function Business supports, technical assistance, connection to of cooperatives,” as non-speculative firms deserving of public market support, into the constitution in 1948. From there, it developed ▶ Flexible manufacturing networks: Small firms operate in a complex of interrelated policies that create incentives for cooperative networks within industrial districts. cooperatives to retain reserves, federate with one another, and ▶ ERVET (“Emilia-Romagna Valorizzazione Economica Territorio” fund their own growth by retaining wealth within the cooperative or “real service centers” in English): Government centers system. The government provided funding for technical provide targeted business services to small firms in key assistance and other supports for cooperative businesses. sectors, including research and development, purchasing, and Critically, the Emilian model started with a manufacturing base. collaborative bidding. A second wave of growth for the maturing ecosystem expanded ▶ There is a strong ethic of co-op to co-op support in worker ownership to the social sector, creating care cooperatives purchasing and other economic linkages. that contract with the government both to provide services to and to employ “disadvantaged” members of the community. Financing ▶ Co-ops must contribute 3% of surplus to cooperative In fifty years, Emilia Romagna (pop. 4.5 million) has experienced solidarity and loan funds, resulting in a large pool of capital a remarkable turnaround, from being the weakest region in that is available to and controlled by worker cooperatives. Italy economically to one of the strongest, with a robust small ▶ Via the Marcora Act, the government matches investment in business community. One in twelve people in Emilia Romagna co-op conversions and allows unemployment benefits to be is a small business owner. As of 2015, it had a per capita gross invested in cooperatives. domestic product that was 21% higher than the EU average, with unemployment under 5% and one of the lowest rates of Policy inequality in Europe (Gini index 0.25). Emilia Romagna contains ▶ The 1947 Basevi law mandates the formation of co-op 7% of Italy’s population but generates 9% of its GDP, 12% of its federations, and a 1948 law enshrines the “social function of exports, and a startling 30% of its patents. Household wealth in cooperatives” in the Constitution. Tax exemption for indivisible 2015 was 30% higher than the Italian average. reserves (retained earnings) is based on this social good. ▶ Three worker co-op federations, each affiliated with a social or As of 2015, around 3,600 cooperatives, most of them small political institution, are in the process of merging. firms, employ 250,000 people and generate about 13% of the ▶ The federated Alliance of Italian Cooperatives (Alleanza delle GDP in the region. Worker cooperatives are concentrated in two Cooperative Italiane) provides research, strategy, advocacy sectoral clusters: (1) manufacturing, including food processing, and general capacity building for worker cooperatives. and (2) “social cooperatives” that now provide a substantial portion of health care and social service delivery in the region.
54 Endnotes
1. http://www.citylab.com/housing/2015/08/americas- cooperatives, generally formed for the purpose of biggest-problem-is-concentrated-poverty-not- supporting or supplying goods or services to the primary inequality/400892/ cooperatives that constitute it. 2. See World Economic Forum, Entrepreneurial Ecosystems 12. Abell, Worker Cooperatives: Pathways to Scale, p. 6. around the Globe and Early-stage Company Growth 13. Member equity is the cornerstone capital contributed: Dynamics, January 2014, reports.weforum.org/ Worker-owners make a membership contribution, entrepreneurial-ecosystems-around-the-globe-and- which ranges from several hundred dollars per member early-stage-company-growth-dynamics/. Information (or even less in some cases) to as much as $5,000– on the Babson Entrepreneurship Ecosystem Project $10,000 per member. While an essential part of a co-op, and Daniel Isenberg’s work can be found at: http://www. member capital is usually insufficient for a worker co- forbes.com/sites/danisenberg/2011/05/25/introducing- op’s startup and growth needs, especially when worker- the-entrepreneurship-ecosystem-four-defining- owners lack personal wealth. characteristics/ and http://www.babson.edu/executive- 14. Half of the worker cooperatives or networks of worker education/custom-programs/entrepreneurship/Pages/ co-ops in the U.S. that have 50 or more employees entrepreneurship-ecosystem.aspx were created by a co-op developer. See Abell, Worker 3. See John P. Kotter’s eight-step Action Plan for Change, Cooperatives: Pathways to Scale, p. 6 for a list of the popularized in his change management classic Leading largest worker co-ops in the country. Change (1996), and Forum For The Future’s “Creating 15. See Abell, Worker Cooperatives: Pathways to Scale, the Big Shift: System Innovation for Sustainability” by pages 17–20 for a discussion of five common Stephanie Draper (2014). approaches to worker co-op development. 4. Lawrence H. Summers and Ed Ball, Report of 16. An employee stock ownership plan (ESOP) is an the Commission on Inclusive Prosperity (Center employee-owner program, created as a retirement plan, for American Progress, January 2015), https:// that provides a company’s workforce with an ownership www.americanprogress.org/issues/economy/ interest in the company. In an ESOP, the company report/2015/01/15/104266/report-of-the- provides its employees with stock ownership, often commission-on-inclusive-prosperity/. at no up-front cost to the employees. ESOP shares, 5. “A co-operative is an autonomous association of however, are part of employees’ remuneration for work persons united voluntarily to meet their common performed. Shares are allocated to employees and may economic, social, and cultural needs.” “Co-operative be held in an ESOP trust until the employee retires or Identity, Values, and Principles,” International Co- leaves the company, when the shares are sold. operative Alliance, http://ica.coop/en/whats-co-op/ 17. B Corps are corporations certified by the nonprofit B Lab co-operative-identity-values-principles. For a summary to meet rigorous standards of social and environmental of the current state of worker cooperatives in the performance, accountability, and transparency. U.S. and details about their many benefits, see Hilary Abell, Worker Cooperatives: Pathways To Scale (The 18. “7 Cooperative Principles,” National Cooperative Democracy Collaborative, June 2014), http://www. Business Association CLUSA, https://www.ncba.coop/7- project-equity.org/worker-cooperatives-pathways-to- cooperative-principles. scale/. 19. The largest worker cooperative in the U.S., Cooperative 6. Jessica Gordon Nembhard, Collective Courage, Home Care Associates, has 2,500 employees, and the University of Pennsylvania Press, 2014. John Curl, For All largest in the world, Mondragon, has 80,000. the People, PM Press, 2009. 20. See John P. Kotter’s eight-step Action Plan for Change, 7. Source: Prospera, formerly WAGES (Women’s Action to popularized in his change management classic Leading Gain Economic Security) Change (1996), and Forum For The Future’s “Creating the Big Shift: System Innovation for Sustainability” by 8. Source: Cooperative Home Care Associates Stephanie Draper (2014). 9. A study of three towns in Northern Italy showed that the 21. Gini coefficient is a standard measure of inequality, town with the highest percentage of people employed where 0 means all people have same amount, and 1 in worker cooperatives had higher indices of social well- means one person has all the money. Source of all Gini being in areas including health, education, crime, and index data here is: http://www.bizjournals.com/bizjour- social participation. David Erdal, “Employee Ownership nals/news/2014/01/31/gini-indexes-of-income-in- is Good for Your Health,” Journal of Cooperative Thought equality-in.html and Practice, vol. 11, no. 1 (2012), http://www.oeockent. org/download/cooperatives/journal-of-cooperative- 22. In The Worker Co-operative Movements in Italy, Mon- thought-and-practice-vol1-no1.pdf.pdf. See also dragón, and France: Context, Success Factors, and Carol Murray, Co-op Survival Rates in British Columbia, Lessons (Canadian Worker Co-operative Federation, Port Alberni, BC, Canada: BC-Alberta Social Economy 2010), Corcoran and Wilson identify seven common Research Alliance, 2011. elements in European worker co-op ecosystems that have achieved scale. The seventh is scale itself: “having 10. Stacy Mitchell, Working Paper: “A Local Business Policy achieved a size and strength to enable the worker co-op Roadmap,” Institute for Local Self-Reliance, 2014. movements to be taken seriously by governments, the 11. A secondary cooperative is a cooperative of broader co-operative sector, etc.” (p. 1). 55 project